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Home / Futures Blog / Market Dimensions Advisory: Market Action Alert – Soybeans Entry

Market Dimensions Advisory: Market Action Alert – Soybeans Entry

January 5, 2016 by Andrew Pawielski

This blog update is highlighting the Market Action Alert Soybean Spread entry that was released and sent to subscribers of the Market Dimensions advisory 1/5/15.  This is the 2nd spread entry for the month of January 2016.  If you would like to follow these Market Action Alerts, as well as my short term futures trades, contained with-in my MDA SnapShot, I encourage you to sign up for your FREE subscription to the service.  To see an archive of my MDA alerts please visit my blog archive here: https://www.danielstrading.com/market-dimensions-advisory/

Published 1/5/15:

Traders,

I have my eye on a seasonal spread in the Soybean market. This will be a bull spread buying July and Selling November. We are approaching a seasonal play 1/31/16 that shows a bullish move in this relationship. When looking at the price action of the July16 vs the Nov16, we see that there is quite a divergence in the price relationship we have seen in the 5y 10y and 15y historical patterns. It appears only 2-3 years in the last 20 has had us at these prices and stayed at these prices until expiration. I like the upside potential on this trade as we historically have been trading 30 cents higher than these prices. It makes me think if we get any strong bullish fundamental grain or Soybean news we have some nice room to run up.

From a technical standpoint, we have a nice channel forming between -1.75 cents on the high side to about -6 to -7 cents on the downside. Currently, we are trading right about in the middle -4.25 cents. I am looking to get long this spread @ -5 cents or better. The goal is for us to trade back into parity and look to trade at 10 cents. The 200-day moving average has us @ +14.5 cents so I will keep a long term on that as target 1.

The spread relationship on Soybeans allows us to take advantage of reduced margin. The margin associated with these 2 contracts $495. As you can see over the past 2 months this contract has only traded 4-5 cents in either direction. So this could be a longer term trade. The idea is to get in now and look for a pop of fundamental news that could pop us higher quickly. This is a spread that you can take advantage of the lower margin and hold multiple positions. If you have the margin available and comfortable with the risk, I would suggest looking to trade 4-5 contracts to start. To discuss what is best for you and your risk tolerance I recommend you reach out to me to discuss.

Spread Trade: Buy July Soybeans – Sell November Beans – 1/5/15

Entry: -5 cents or better (-0.0500) to buy side dt Pro (last at -4 cents)

Risk: Looking to risk 10 cents or $500 on the trade (before fees)

Target: First Profit target is +10 (+15 cents or $750 before fees)

Margin: $495 per contract

 

Daily Soybean Spread Chart – July16 vs November16 – Source dt Pro:

Source: dt Pro
Source: dt Pro

Seasonal Price Movement:

Source: Seasonal Algo
Source: Seasonal Algo

Risk Disclosure

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.

EXAMPLES OF SEASONAL PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES OR CONDITIONS ARE COMMON OCCURRENCES OR LIKELY TO OCCUR.

STRATEGIES USING COMBINATIONS OF POSITIONS, SUCH AS SPREAD AND STRADDLE POSITIONS MAY BE AS RISKY AS TAKING A SIMPLE LONG OR SHORT POSITION.

EXAMPLES OF HISTORIC PRICE MOVES OR EXTREME MARKET CONDITIONS ARE NOT MEANT TO IMPLY THAT SUCH MOVES OR CONDITIONS ARE COMMON OCCURRENCES OR ARE LIKELY TO OCCUR.

THE RISK OF LOSS IN TRADING COMMODITY FUTURES AND OPTIONS CONTRACTS CAN BE SUBSTANTIAL. THERE IS A HIGH DEGREE OF LEVERAGE IN FUTURES TRADING BECAUSE OF SMALL MARGIN REQUIREMENTS. THIS LEVERAGE CAN WORK AGAINST YOU AS WELL AS FOR YOU AND CAN LEAD TO LARGE LOSSES AS WELL AS LARGE GAINS.

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.

Filed Under: Market Dimensions Advisory (MDA)

About Andrew Pawielski

Since 2007, Andrew has been a series 3 registered Senior Futures and Options Broker with Daniels Trading. During this decade plus tenure, Andrew has worked with traders in all different strategies, capital sizes and experience levels throughout the world.

Having this professional brokerage experience and being a futures market participant led Andrew to found the educational trading service Market Dimensions Advisory (MDA). MDA showcases Andrew’s expert technical trading analysis using the TAS MarketProfile tools and other highly regarded volume and order-flow based trading indicators. This professional trading service is a compilation of all Andrew’s trading experiences, concepts, methodologies and real-time trading ideas.

It is Andrew’s goal to empower traders, and through his services, move them from fear to familiarity through frequency.

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Risk Disclosure

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.

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