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CommodityTrader.com
Commodity Trader welcomes Keith Amirault of Odom & Frey Futures and Options to the writers team and extends a special thanks to Odom & Frey for providing consistently well researched trade recommendations. Derek Frey the Head Trader is presenting at the Online Virtual Conference called "Secrets of Trading" (100% live virtual online expo for Traders) December 4th-8th. Register for free by visiting Traders World.
Regards,
CommodityTrader.com
www.commoditytrader.com
In this
issue:
- Crude Oil Trade Recommendation - by Derek Fry
- The Underlying Fundamentals - by Keith Amirault
- U.S. Dollar Index Bears Strong - by Jim Wyckoff
- Gasping for Air Up There - by Charlie Santaularia
- Record High Corn Price Prediction - by Peter Kordell
Crude Oil Trade Recommendation - by Derek Fry
click on the chart to enlarge
Technical / Fundamental Explanation:
Crude oil has drifted in a narrow sideways channel for over two months now. OPEC has recently hinted at another production cut to further stabilize price. Today we saw inventory numbers for crude and distillates lower than expected. At the same time we have colder weather bearing down on us. The following is an excerpt from today's issue of Gulf Times from Doha, Qatar:
“Price support is coming from a range of different factors at present, including forecasts of a change to below normal temperatures in the US northeast for later this week and early next,”
Barclays Capital analyst Kevin Norrish also said that crude futures were being boosted by expectation that dollar weakness could boost re-stocking activity of products such as heating oil in some major consuming markets such as Germany.
So you can see that the weakening dollar is the the rising tide that lifts all ships. Crude is poised to move back into the mid sixties in the near term and this trade is designed to profit from exactly that.
Trade Recommendation
Buy one January 2007 Crude oil 63 call and buy one January 2007 Crude oil 69 call while selling two January 2007 Crude oil 66 calls for a maximum cost and risk of 70 points ($700) or less to open a position.
Profit Goal:
Max profit, assuming a 70 point fill, is 230 points $2300 and occurs at expiration with crude oil trading at $66. The break even point at expiration is 63.70 and 68.30. This leaves us with a profit zone of 460 points between the break even points!
Risk Analysis:
Max risk, before commissions and fees, and assuming a 70 point fill, is $700. This occurs at expiration with January Crude oil trading below 63.00 or above 69.00.
Underlying Fundamentals - by Keith Amirault
Last week we saw continued weakness on the U.S economic front. The ISM report came in last week at 49.5, the lowest level in three years. This did not bode well for the dollar and it continues to show signs of weakness versus most of the majors. We have been bearish the dollar for quite a while. As oil prices push back into the low to mid 60’s, expect a renewed concern about the spillover from higher energy prices into inflationary measures. What does all of this mean?
Read the full article.
U.S. Dollar Index Bears Strong; But Mkt. Oversold - by Jim Wyckoff
March U.S. dollar index futures on the New York Board of Trade on Tuesday hit a fresh six-month low of 82.82. Prices are in an accelerating downtrend from the mid-October high of 86.78. Bears have quickly gained strong downside technical momentum. Veteran currency traders know that the greenback has a tendency to sell off heading into the end of the calendar year. Currency veterans also know that trends in the currency markets generally tend to be stronger and longer-lasting than price trends in the commodity markets.Read the full article.
Gasping for Air Up There - by Charlie Santaularia
The S&P 500 has run 170 points (13.8%) essentially unabated since July’s low of 1230. It’s as if the market earns brownie points each day for setting new multi-year highs, just as an alpha male earns brownie points for flattering remarks toward his girlfriend. The problem here is that the air up here is getting thin. It is getting tougher and tougher to breathe. Although the market has consistently made higher highs over the past four months, several things have caught my eye and make me slightly uneasy with the market’s current valuations.Read the full article.
All-Time Record High Prices for Corn by the Summer of 2007
A prediction by Peter J. Kordell, President, Slipka Financial Partners.
I started trading commodities in 1968. During my 38 year career in the futures industry, I have witnessed or participated in every all-time high of every futures market currently trading. One thing I have learned about markets that are making new all-time record highs is that there comes a tipping point when frenzied buyers forget about fundamentals and rational pricing. Prices rise to record highs on emotions and not on sound reasoning.
Read the full article.
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