Futures Performance Looks To Be Mixed

Sugar Futures

Sugar futures in the May contract finished slightly higher this Friday afternoon in New York, up 12 points at 15.30 a pound as prices are hovering right near a 2 week high. I'm keeping a very close eye on this market as I'm looking at a bullish position on any type of weakness as I believe the risk/reward is in your favor, especially longer-term.

Fundamentally speaking, prices continue to be undercut by the raging pandemic in Brazil, which may prompt the government to extend lockdowns that crimp fuel demand and encourage Brazil's sugar mills to divert more cane crushing toward sugar production rather than ethanol production, thus boosting sugar supplies. Brazil reported a record of 4,195 Covid deaths on Tuesday.

I believe the Coronavirus will be reduced significantly in Europe. Therefore demand will come back to these commodities eventually. It is just a matter of when the United States is performing excellent at the current time. Sugar is still trading right at its 100-day moving average but slightly below its 20-day as the trend is mixed to lower, so look to be a buyer on any price weakness. I do not believe the 17.50 level will be the high in this commodity come 2021.

I also have bullish recommendations in coffee, orange juice, and cotton as I think the whole sector remains cheap. The chart structure at the current time is starting to improve daily as we are trading at major support on the monthly chart as I see no reason to be short.

TREND: MIXED - LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: HIGH

Cotton Futures

Cotton futures in the May contract is higher this Friday afternoon in New York, up another 60 points at 82.16 as prices are right near a 2 week high. The volatility in cotton certainly has increased substantially over the last several weeks.

I have been recommending a bullish from the 79.00 level and if you took that trade, continue to place the stop loss at 66.00 as an exit strategy as I think there is a high probability that a bottom has taken place.

Cotton prices are trading above their 20-day but slightly below their 100-day moving average as the trend is mixed to lower. You have to remember this was a counter-trend recommendation as I thought prices were overdone to the downside.

The acres report released last week was much neutral as weather conditions in the southern part of the United States will be the main dictator of short-term price action going forward as we have not experienced a serious drought since 2012.

I also have bullish recommendations in coffee and orange juice while also keeping a very close eye on the sugar market. I think the commodities are poised to have a significant rally in 2021 as there is so much money sloshing around at the current time it needs a place to go. I think some of these depressed commodities will be the beneficiary.

TREND: MIXED - LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE

Cocoa Futures

Cocoa futures in the May contract is breaking a two-day losing streak, trading up 5 points at 2389 as prices are trading right at major support on the monthly chart. I'm sitting on the sidelines waiting for the chart structure to improve; therefore, the risk/reward would be more in your favor. However, I believe the downside is limited to possibly another 100/150 points lower in the short term.

Cocoa prices are trading below their 20 and 100-day moving average as the trend has turned to the downside. Prices have dropped about 300 points over the last month or so on supplies increasing worldwide, coupled with the fact that the U.S dollar also has had a slight rally over the last several months.

I will be looking at a bullish position in the coming days or weeks ahead as I would like to see some sideways action come about, so keep a close eye on this market as we could be involved soon. I have bullish recommendations in orange juice, coffee, and cotton. I also think the sugar market is headed higher as this entire sector remains cheap. I hope to be a buyer, especially on any type sell off capitulation.

TREND: MIXED - LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE

Mexican Peso Futures

The Mexican Peso in the June contract is trading lower by 16 points at 4928 as prices are hovering right near a 3 month high, continuing its bullish momentum this week.

I am now recommending a bullish trade while placing the stop-loss under the March 8th low of 4575 as the risk is around $1,800 per contract plus slippage and commission as I do believe the U.S. dollar has topped out in the short-term. The volatility remains low as we continually grind higher weekly as prices are trading above the 20 and 100-day moving average, telling you that the trend has turned to the upside. The next level of resistance stands at the January 21st high of 5033, and if that is broken, this market could have significant room to run to the upside, so play this higher as the trend is your friend, especially in the currency markets.

Historically speaking, the Peso remains depressed as this currency traded much higher 10 years ago from today's price level. I will be looking at adding more contracts to the upside, and if this trade turns into a winner, I will plan on adding more contracts as adding to winning trades and exiting losers is the way to go over time, in my opinion.

TREND: HIGHER
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE

Natural Gas Futures

Natural gas futures in the June contract finished slightly higher this Friday afternoon in New York, up 1 point at 2.61 as prices look to be bottoming out, in my opinion.

Fundamentally speaking, a smaller-than-expected build in weekly nat-gas inventories. However, gains were limited by forecasts for above-average U.S. temperatures after the Commodity Weather Group said today that the eastern and southern U.S. should see warmer-than-normal temperatures through April 12th, which would reduce heating demand.

However, conditions are seen turning colder across much of the country from April 13-17th. I'm sitting on the sidelines, waiting for a further price decline to around the 2.40 level to enter. This commodity remains depressed, in my opinion, at least in the short term.

I will also recommend a bullish position if prices close above the four-week high standing at 2.71 while then placing the stop loss at 2.40. The risk would be around $3,100 or $750 per mini contract plus slippage and commission, so keep a close eye on this market as we could be involved soon.

TREND: MIXED - LOWER
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE

Coffee Futures

Coffee futures in the May contract finished higher by 40 points at 128.25 a pound as prices have now hit a two-week high, continuing its short-term bullish momentum.

I have been recommending a bullish position over the last couple of weeks from around the 126 area and if you took that trade, continue to place the stop at the 106 level as I will not raise that stop for another couple of weeks as I want to give this trade some room.

Fundamentally speaking, prices have been moving higher this week on carry-over support from Tuesday when Citigroup said that arabica coffee would have a "sizable" deficit of -7.5 mln bags for the 2021/22 crop cycle. Coffee prices also have support due to dry conditions in Brazil. Somar Meteorologia reported Monday that rain last week in Minas Gerais, Brazil's largest arabica growing region, measured 8.2 mm, or only 32% of the historical average.

Coffee prices are trading right at their 20-day and slightly above their 100-day moving average as the trend is mixed. Prices did hold major support around the 120 level, also looking to break out of the downtrend line if prices crack the 130 area as I see no reason to be short, so stay long and continue to place the proper stop loss. I do not believe the 140 level will be the high in 2021.

TREND: MIXED
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE

Live Cattle Futures

Live cattle futures in the June contract is down 25 points at 125.77, right near a 1-year high as today was blamed on minor profit-taking.

If you have been following my previous blogs, you understand that I've been bullish on cattle for quite some time. If you are long a futures contract, I would continue to place the stop loss under the 10-day low, which now stands at 120.87 as an exit strategy as the chart structure will improve daily next week, therefore, lowering the monetary risk.

I have talked to several of my former clients, and they're concerned at how high corn prices have become and are worried that if there is any type of weather problem that could send prices to all-time highs, which would affect the cattle market negatively. However, I believe that quantitative easing will continue to support all commodity prices, just like what happened in 2011. This trade will have to be micromanaged daily because it could turn quickly.

Cattle prices are trading above their 20 and 100-day moving average. The trend remains to the upside as the entire livestock sector is experiencing bullish trends as hog prices have caught absolute fire over the last couple of months, so continue to play cattle higher.

TREND: HIGHER
CHART STRUCTURE: IMPROVING
VOLATILITY: AVERAGE

What do I mean when I talk about chart structure and why do I think it’s so important when deciding to enter or exit a trade? I define chart structure as a slow grinding up or down trend with low volatility and no chart gaps. Many of the great trends that develop have very good chart structure with many low percentage daily moves over a course of at least 4 weeks thus allowing you to enter a market allowing you to place a stop loss relatively close due to small moves thus reducing risk. Charts that have violent up and down swings are not considered to have solid chart structure as I like to place my stops at 10-day highs or 10-day lows and if the charts have a tight pattern that will allow the trader to minimize risk which is what trading is all about and if the chart has big swings your stop will be further away allowing the possibility of larger monetary loss.

If you are looking for a futures broker feel free to contact Michael Seery at 630-408-3325 and he will be more than happy to help you with your trading or visit www.seeryfutures.com

Michael Seery, President
Seery Futures
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Phone #: 630-408-3325


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