Gold Futures
Gold futures in the June contract settled last Friday in New York at 1,698 while currently trading at 1,740 up over $40 for the week continuing it's bullish momentum while still experiencing high volatility.
At the current time, I do not have any precious metal recommendations as I was stopped out of silver earlier in the week. However, if you are long a futures contract, I would place the stop loss under the April 21st low of 1,666 as an exit strategy as this is a very high-risk trade with large price swings that we experience daily. For the bullish momentum to continue, prices have to break the April 14th high of 1,788 in my opinion as we are witnessing a bullish trend as we are above the 20 and 100-day moving average. However, the problem with this market at the current time is that it has large sell-offs and then comes back every single time, but it has not been an easy trade to the upside even though we are trading at a 7-year high.
Economic stimulus continues to support prices as the U.S. government is putting trillions of dollars into the economy because of the Coronavirus situation as that is supportive towards the precious metals as trading this commodity should only be dealt with large trading accounts due to the risk.
TREND: HIGHER
CHART STRUCTURE: POOR
VOLATILITY: HIGH
Coffee Futures
Coffee futures in the July contract settled last Friday in New York at 117.55 while currently trading at 109.60 a pound down about 800 points for the trading week hitting a 5-week low as prices look to head back down to the 100 level in my opinion.
Fundamentally speaking, prices have been on the defensive this week on concern that the slump in the global economy from the coronavirus pandemic will reduce coffee demand. Comexim Ltd on Wednesday said they expect no growth in global coffee demand this year and that there will be a 2020/21 global coffee surplus of 8 mln bags.
Coffee prices are trading below their 20 and 100-day moving average as this trend has turned negative. However, this market has been incredibly choppy over the last 6 months as I am currently sitting on the sidelines waiting for the chart structure to improve, which could still take a couple more weeks, but I do not think the 100 level will not be breached just tested.
TREND: LOWER
CHART STRUCTURE: SOLID
VOLATILITY: AVERAGE
Sugar Futures
Sugar futures in the July contract settled last Friday in New York at 10.53 while currently trading at 9.85 down nearly 70 points for the trading week as prices are hovering right near a 12-year low which is remarkable in my opinion. Sugar prices have been following oil to the downside as oil prices went negative earlier in the week before rallying as there is very weak demand for biodiesels at this time.
Fundamentally speaking, prices have been under pressure from Brazilian sugar output figures after Brazil's national crop agency. Conab, on Thursday, issued its final estimate and said Brazil 2019/20 sugar production rose +2.6% y/y to 29.8 MMT while another negative for sugar is the persistent weakness in the Brazilian Real.
I was looking at a possible bullish position if prices held the $10 level, but that did not occur. It seems to me that we will go down to the 9.00 area in the coming weeks ahead as this market remains bearish. However, eventually, prices are going to get cheap enough that you will have to start looking at a longer-term bullish situation, but not at this time. If you are short a futures contract, I would place the stop loss above the 10-day high, which stands at 10.53 as an exit strategy.
TREND: LOWER
CHART STRUCTURE: SOLID
VOLATILITY: AVERAGE
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
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.
Corn Futures
Corn futures in the July contract settled last Friday in Chicago at 3.29 a bushel while currently trading at 3.20 down about $0.09 for the trading week experiencing higher than normal volatility. That will be the norm in the coming months ahead as the weather will undoubtedly dictate where prices head from here.
If you have been following my previous blogs, you understand that I am bearish corn. If you are short a futures contract, I would continue to place the stop loss above the 10-day high standing at 3.37 as the chart structure will continue to improve in next week's trade, therefore, lowering the monetary risk as I still believe the $3 level will be breached soon. Ideal weather conditions in the Midwestern part of the United States should allow planting to be in full swing coupled with the fact of incredibly weak demand for ethanol in the United States as I see no reason to be an owner of corn at this time.
Corn prices are trading far below their 20 and 100-day moving average as this trend is strong to the downside, and unless some type of drought develops, we will probably produce another record crop. Therefore, ballooning carry over levels as this is not a good situation for U.S. farmers.
TREND: LOWER
CHART STRUCTURE: SOLID
VOLATILITY: AVERAGE
Cotton Futures
Cotton futures in the July contract settled last Friday at 52.86 while currently trading at 55.44 up about 250 points for the trading week as prices are right near a 5 week high.
Spring planting is currently underway in the southern part of the United States as weather conditions will dictate short-term price action for the next several months as the volatility will undoubtedly expand, especially if hot and dry weather conditions come about. I have been recommending a bullish position from around the 55.50 level. If you took that trade, continue to place the stop loss under the 10-day low standing at 52.00 as an exit strategy. However, the chart structure will not improve for another seven sessions, so you will have to accept the monetary risk. Several states have opened retail stores, which should spark demand for cotton, which would be a fundamental bullish factor that has been the main reason for these multi-year lows.
Cotton prices are still trading above their 20-day but below their 100-day moving average as the trend is mixed to higher, but I do believe that the risk/reward is in your favor to take a bullish position.
TREND: HIGHER - MIXED
CHART STRUCTURE: SOLID
VOLATILITY: AVERAGE
Cocoa Futures
Cocoa futures in the July contract settled last Friday in New York at 2,368 while currently trading at 2,332 down slightly for the trading week still stuck in a 5-week tight consolidation between 2,200 / 2,400. I will be recommending a bullish position if prices close above the April 7th high of 2402 while then placing the stop loss under the multi-year low, which was hit on March 20th at 2,201 as the risk would be around $2,000 per contract plus slippage and commission.
If you have read my consolidation rule, it states that the longer the consolidation, the more powerful the breakout is as that was the one main reason why I recommended a short cattle contract at the 124.50 level a couple of months ago. The consolidation lasted for several months, and then the breakout was severe to the downside, so keep a close eye on this market as we could be involved soon.
Cocoa futures are trading above their 20-day but still below their 100-day moving average as the trend is mixed, but a breakout is looming soon, in my opinion.
TREND: MIXED
CHART STRUCTURE: EXCELLENT
VOLATILITY: AVERAGE
Trading Theory
When is it time to sell? In my opinion, if you are long a futures contract and you have lost 2% of your account balance on that trade exit and move on and look at other trends that are beginning as the theory states.
Generally speaking, if you long a futures contract, I would place the stop loss under the 2 week low, which is also the 10-day low as well as an exit strategy. The theory states if a market has been going against you for that time frame, that means that you are probably wrong, so it's time to move on.
Successful traders exit losing trades very quickly. It's a mathematical certainty that you will have losing trades, so you must manage them well. No exit strategy is 100% correct, but that's one that I've been following for many years, and I think it works well.
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
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There is a substantial risk of loss in futures, futures option and forex trading. Furthermore, Seery Futures is not responsible for the accuracy of the information contained on linked sites. Trading futures and options is Not appropriate for every investor. My opinion in this blog are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any futures or option contracts.
