Picking Tops & Picking Bottoms

Any trader who tries to pick tops or pick bottoms is destined to fail. When we buy/sell clients a commodity it is not because we are picking a bottom or top but rather we think either the commodity is undervalued or overvalued so we are looking for a move in the coming hours, days, weeks or months. Oil closed down today near the weekly lows not a great end to the week but we remain confident that this is a good level for traders with a time frame over 4 weeks. As we’ve voiced we feel we are close to turning higher and expect $80 before the May contracts expire. Aggressive clients started buying natural gas with stops below the weekly lows today. We prefer May call spreads and will have some ideas next week.
The rally I was waiting for to sell the ES and S&P may not come; some of our more aggressive clients are short and I commend them for their bravery. We see resistance at 1082 and support at 1055 followed by 1030. Cocoa was lower by 2.3%, those short look to book profits on trade below 3150 next week. We should know Monday if sugar will correct or not as prices took 3 attempts at 30 cents this week and failed. Clients that hold calendar spreads were advised to buy May call protection against a breakout to new highs. OJ was lower by 5% today though the trend line that has held since October is still intact on the May contract. If that level gives way we may cut losses on client’s options next week. March silver held $16/ounce again today and gold was only lower by $2. This in not too bad considering the action in outside markets. Our sentiments have not changed. Euro-dollars end the week back at pre Fed levels; we still suggest lightly scaling into shorts or buying long dated puts.
Clients have no exposure yet in soybeans or soy meal so we welcome the slide lower but corn down 1.5% we do not like as much. December is trading at the lowest level since the first week of October; we’re suggesting getting long. Clients went flat on their June live cattle at a small profit; there is too much uncertainty presently. On a break we would look to re-enter bullish plays. Continue to sell rallies in the Pound. Clients took off their Aussie puts today in the morning at a small loss on the Q4 GDP#. I am impressed with the dollars strength this week but moving forward expect a sideways 77/80 cent range NOT the appreciation we’ve seen.
Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

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