For the Week of January 27, 2013
The Trade Spotlight advisory service applies the GBE trading methodology (buying or selling commodity contracts based on breakouts of chart formations and technical indicators) to identify one to two trade setups per week.
Highlighting This Week’s Potential Breakouts:
Let’s review the Soybean complex:
The May 2014 Soybean contract is trading sideways and setup for a Neutral Market Strategy. This strategy involves “writing” (selling) call and put options on either side of the resistance and support levels. The potential upside resistance is the 1349’4 high (2/05/13). The contract tested this high on 9/04/13 but failed to follow through. The potential downside support is the twelve-month contract low of 1175’4 (8/07/14). The goal is to collect premium on both sides as the contract continues its sideways trading pattern. On Friday, the contract broke through albeit closed above a lower trend line. There are touches on the lower trend line at 1175’4 (8/07/13), 1177’2 (8/08/13), 1248’6 (1/08/14), 1249’0 (1/09/14), and 1250’0 (1/13/14). This lower trend line is acting as support as well. A 20-day Exponential Moving Average and 50-day Simple Moving Average are flat. MACD, a trend indicator, and Stochastics, a Momentum indicator, are flat as well.
The March 2014 Soybean Meal contract has formed a Double Top Formation and Trend Line Formation. Both of these formations potentially setup a trade opportunity to the downside. Though currently the Trend Seeker (a US Chart Company tool to help identify market trend) is Up. In addition, the MACD, a trend indicator, and Stochastics, a Momentum indicator, are bullish. Along with the indicators reversal, a close below the lower trend line will trigger a trade to the downside. There are touches on the trend line at 378.8 (11/05/13), 403.4 (1/02/14), and 409.0 (1/13/14). A potential downside target is the 378.4 low (11/01/13).
The March 2014 Soybean Oil contract setup a Hi-Lo Breakout Formation. A close below the twelve-month contract low of 37.42 (1/08/14) will trigger a short entry opportunity. On Friday, the contract made a new low at 37.09, but failed to close below 37.42. The Trend Seeker (a US Chart Company tool to help identify market trend) is Down. In addition, the MACD, a trend indicator, is extremely bearish. Stochastics, a Momentum indicator, is bearish in the “over sold level” RSI, another Momentum indicator is strong to the downside. A potential stop loss can be placed above the pivot point of 38.45 (1/21/14) and 20-day Exponential Moving Average (38.20). A potential target of 33.46 is calculated using a Wave Projection Price.
STOP ORDERS DO NOT NECESSARILY LIMIT YOUR LOSS TO THE STOP PRICE BECAUSE STOP ORDERS, IF THE PRICE IS HIT, BECOME MARKET ORDERS AND, DEPENDING ON MARKET CONDITIONS, THE ACTUAL FILL PRICE CAN BE DIFFERENT FROM THE STOP PRICE. IF A MARKET REACHED ITS DAILY PRICE FLUCTUATION LIMIT, A "LIMIT MOVE", IT MAY BE IMPOSSIBLE TO EXECUTE A STOP LOSS ORDER.
This material is conveyed as a solicitation for entering into a derivatives transaction.
This material has been prepared by a Daniels Trading broker who provides research market commentary and trade recommendations as part of his or her solicitation for accounts and solicitation for trades; however, Daniels Trading does not maintain a research department as defined in CFTC Rule 1.71. Daniels Trading, its principals, brokers and employees may trade in derivatives for their own accounts or for the accounts of others. Due to various factors (such as risk tolerance, margin requirements, trading objectives, short term vs. long term strategies, technical vs. fundamental market analysis, and other factors) such trading may result in the initiation or liquidation of positions that are different from or contrary to the opinions and recommendations contained therein.
Past performance is not necessarily indicative of future performance. The risk of loss in trading futures contracts or commodity options can be substantial, and therefore investors should understand the risks involved in taking leveraged positions and must assume responsibility for the risks associated with such investments and for their results.
Trade recommendations and profit/loss calculations may not include commissions and fees. Please consult your broker for details based on your trading arrangement and commission setup.
You should carefully consider whether such trading is suitable for you in light of your circumstances and financial resources. You should read the "risk disclosure" webpage accessed at www.DanielsTrading.com at the bottom of the homepage. Daniels Trading is not affiliated with nor does it endorse any third-party trading system, newsletter or other similar service. Daniels Trading does not guarantee or verify any performance claims made by such systems or service.