Any sustainable bull market needs to take a breath and rest up for the next leg. The long commodity trade that has been working for the last several months has been momentarily put on hold. So what to do as a trader? We have taken profits on longs, decreased our long exposure, tightened up stops or in some instances done the unimaginable, gone short. Yes that’s right, what investors need to understand is when speculating in commodities it’s only a wager on if prices are too high or too low. The contract size is the same, the leverage is the same, the risk parameters and profit potential don’t change that much. The only change is the direction. I’m sorry if you only manage your portfolio as long, in commodities you will have some rough patches. As long as the global economic recovery is in question we may get some dollar strength and commodity weakness but we feel that will be temporary.
September Euro lost 30 ticks last week on two-sided trading. Support comes in at 1.3730 with resistance at 1.4025 followed by 1.4125. On the daily chart it looks like we could see a trade higher but the weekly chart is not so convincing, so for now we would stand aside.
The Aussie was lower by 25 ticks last week but prices did close over 2 cents off their lows. Support is seen between .7780 and .7800 with resistance at .8150. We may see a bit more upside but we ultimately expect a trade down to .7500 before any significant upside.
The Swissie managed to gain 16 ticks last week as selling has been rejected now for the last 2 weeks. With verbal intervention last week having little effect, prices could go either way at this juncture. Resistance is seen at .9300 followed by .9400 with support at .9130.
The Loonie gave up 113 ticks last week and on further pressure in energies and metals we would not rule out a trade down to .8500 in the coming weeks. Resistance is seen between .8925 and .8975 with support at .8675.
The Cable advanced 98 ticks on the week but prices have remained largely range bound and we see no reason to have exposure. Support is seen at 1.6150 with resistance eyed at 1.6650. The only play would be to trade the breakout above or below the aforementioned levels.
The yen was the best performer last week gaining 223 ticks and allowing clients out at a profit on their 3 cent July call spreads. Our objective was met mid-week as we advised clients to liquidate their positions at a 33% net profit. Resistance is at 1.0475 while support comes in at 1.0275 followed by 1.0150. We currently have no exposure.
The Kiwi was positive 4 out of the 5 sessions gaining 63 ticks last week. Resistance comes in at .6450 followed by .6550 with support at .6250.
The September US dollar was lower by 15 ticks. It has been a mixed bag in the last 4 weeks; there have been 2 positive and 2 negative. The weekly chart indicates prices should be moving higher but the daily chart is pointing lower so who knows? Resistance comes in at 81.30 while support is seen at 80.25 followed by 79.60.
July corn was lower by 23 ¼ cents last week. December corn closed on the trend line dating back to March, we suggest waiting to see how corn trades over the next few days but we’re very close to getting long. Trade idea: long September futures while simultaneously selling 2 $4.40 calls for approximately 17 cents each. The idea is that on a move higher you will make more on the futures than lose on the options. On a move lower you have 34 cents of protection and it is unlikely to see corn break that much. Support on July comes in at 3.89 while resistance is at 4.10.
July soybeans gave up 65 cents last week and are $1.12 off their highs from just 2 weeks ago. We’ve warned you in recent weeks of a violent correction and our prediction is now becoming a reality. We’re still looking to be a buyer of November beans closer to 9.80 prior to the 6/30 USDA report. The weather and traders positioning ahead of the report will determine if a trade to 9.80 is viable. Resistance is seen at 12.15 and support at 11.50 in July.
July CBOT wheat was lower by 31 ¾ cents last week having closed lower 11 out of the last 14 sessions. Support is seen at 5.44 with resistance between 5.70/5.74. July KCBOT was lower by 24 cents last week. Support comes in at 6.00 with resistance between 6.27/6.30. Both CBOT and KCBOT wheat have traded down to oversold levels so we should see bargain hunting on longs and short covering very soon.
August gold traded lower by $4.10 last week failing to break below the 50 day moving average at 927.70. Last week we saw sideways action with a $17.50 trading range. Resistance comes in at 940 followed by 960 with support at the 50 day moving average followed by 900. As long as prices stay above 900 this week we like the idea of purchasing $100 call spreads in October gold. Last week we were buyers of October 975/1075 call spreads for just under $2000 for clients.
July silver closed down 65 cents last week, most of that coming on Monday. Much like gold, silver was sideways much of the week with prices not wandering out of a 50 cent range from Tuesday thru Friday. Resistance is seen at 14.40 followed by 14.90 with support at the 50 day moving average at 13.93. On a trade below that level we would expect the 61.8% Fibonacci retracement level at 13.40 to hold. We are advising clients to buy $3 December call spreads, last week we were buyers of the $15/18 for clients just over $3000.
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Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Before trading MB Wealth recommends that you should carefully consider your financial position to determine if commodity trading is appropriate for you. All funds committed should be purely risk capital. Past performance is no guarantee of future trading results. There are no guarantees of market outcome stated, everything stated above are our opinions.
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