grains 11/19
The grains are awfully interesting right now. Here's a note from an email conversation.
Looking ahead at March '07 corn, it seems like the chart is at a resting point or "pause" as Ring sometimes says. You can make an argument that it's poised to go higher or that we're in the midst of a topping process. Check out the attached chart for yourself. My bias is that a short position with a stop above the contract high at 381.75 is a relatively safe play considering how well you can limit your exposure. Despite recent strength in the last couple of sessions (tonight we're at 379), the market still has to prove itself on the upside. If it doesn't knock out that previous high, then the fall from grace could be sharp. As we've also spoke about before, traders are just waiting to buy this market so the downside magnitude seems very limited but, nevertheless, there is an area around 350 that looks to be a likely target on a corrective pullback.
If this strategy is completely off on timing, then your risk is only a few cents per contract. The exaggerated moves in the evenings are on low volume; so tonight's 8-9c move higher on thin activity may or may not be reflected in the "real deal trading" tomorrow. That may be a good time to enter if strength doesn't push march to new contract highs.
Chart is from ProphetX and shows the steep uptrend in March '07 corn as well as the ceiling imposed by the contract high. Early this week of 11/19 we could see that ceiling blown off or tested and hold.
Beans will keep rallying with corn to avoid losing too many acres. The short side of beans can be played based on the corn argument just made and might even offer better risk parameters. The only cautionary note is that beans can potentially whip you around even more than corn, so thresholds for stop loss orders need to be clearly defined (as always) from the beginning.
posted by jared @ 3:48 AM
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