Natural Gas Futures
Natural gas futures in the November contract settled last Friday in New York at 2.80 while currently trading at 2.43, down about 37 points for the week, hitting a 2 month low.
I am not involved as the volatility is extremely high. That situation isn't going to change as we enter the winter months as seasonably speaking, you can have tremendous price swings daily. I will be looking at a counter-trend trade soon. I think the contract low, which was hit on June 25th at 2.13, will keep a close eye on this market as I think a bottoming situation is starting to occur.
Gas prices are trading under their 20 and 100-day moving average as the trend is mixed to lower in my opinion as prices topped out right around the 3.00 level just several weeks ago. Fundamentally speaking, industrial natural gas demand remains tepid as BNEF data shows gas demand from power generators was estimated at just under 30 bcf for last Monday, which is the lowest for any September 21st since 2015.
TREND: LOWER - MIXED
CHART STRUCTURE: POOR
Orange Juice Futures
Orange juice futures in the November contract is currently trading at 111.85, ending the week on a sour note after settling last Friday in New York at 105.75, up over 600 points for the week bottoming out around the 105 level.
I'm sitting on the sidelines as my only soft recommendation is a bullish coffee trade. However, I'll keep a close eye on this commodity as we enter the highly volatile autumn and winter season. The volatility will expand tremendously, especially to the upside, because these prices are very depressed. Juice prices are still trading below their 20 and 100-day moving average as the trend is lower, but I believe the downside is limited.
If you look at the monthly chart, the 100 level has acted as major support for quite some time. I don't think prices will trade under that level as I will not go short, and if you do want to jump the gun and take a bullish position, I would buy at today's level while then placing the stop loss under the 105 level as the risk would be around $1,100 per contract plus slippage and commission. However, as I stated before, I will be patient and wait for the chart structure to improve.
CHART STRUCTURE: POOR
Live Cattle Futures
Cattle futures in the December contract is currently trading at 111.05 after settling last Friday in Chicago at 111.40 unchanged for the week, looking for some fresh fundamental news to dictate short-term price action next week. Prices gapped lower today on news that President Trump and the First Lady have been infected with the Coronavirus sending many sectors sharply lower. However, some stabilized later in the day.
I have been recommending a bullish trade initially from the 111.00 level while adding another contract at 113.30 as the average is around 112.15. If you took those trades, place the stop-loss at the 2 week low, which also is the 3-week low at 109.80 on a hard basis only as I am not willing to risk more than that price level.
The chart structure is outstanding at the current time because prices have gone nowhere over the last couple of weeks. So stay long as the risk/reward remains in your favor, and I think the price gap created today will be filled to the upside.
CHART STRUCTURE: EXCELLENT
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Coffee futures in the December contract settled last Friday in New York at 113.65 a pound while currently trading at 108.20, down over 500 points for the trading week. Coffee continues its bearish momentum as abundant rain has entered key coffee growing regions in the country of Brazil, putting pressure on prices in the short-term.
I have been recommending a bullish position from around the 109.55 level, and if you took that trade, continue to place the stop loss at the contract low of 96.90 as an exit strategy as I think the downside is limited. In my opinion, I believe prices are starting to experience oversold conditions as prices topped out at 135.45 on September 4th. We've dropped about 20% in a rather quick time frame as prices are right at major monthly support.
Coffee is trading below its 20 and 100-day moving average as the trend is clearly lower as this is a counter-trend recommendation, which I don't do very often. Still, I believe the risk/reward is in your favor, especially if any weather problem comes about in the coming months ahead. Dry weather in Brazil has already affected the sugar crop as the La Nina weather pattern could throw a wrench into the closet.
CHART STRUCTURE: SOLID
Wheat futures in the December contract settled last Friday in Chicago at 5.44 a bushel while currently trading at 5.75 up over $0.30 for the trading week, acting positively off the crop report, which was released earlier in the week continuing its bullish momentum.
I've been recommending a bullish position from around the 5.40 level and if you took that trade, continue to place the stop loss under the 2 week low standing at 5.37 as an exit strategy. The chart structure will not improve for another 5 trading sessions, so you will have to accept the monetary risk at this time.
Wheat prices are trading above their 20 and 100-day moving average as this trend is strong to the upside. However, for the bullish momentum to continue, prices have to break the September 30th high of 5.87, in my opinion, and if that does occur, I think the $6 level is at hand, so stay long as there is still room to run. The volatility in wheat will certainly expand as we enter the volatile autumn and winter seasons as the risk/reward remains in your favor as traders are keeping a close eye on key growing regions around the world for short-term price action.
CHART STRUCTURE: POOR
Soybean futures in the November contract is trading higher for the 3rd consecutive session after settling last Friday in Chicago at 10.02 a bushel while currently trading at 10.27, up about $0.25 for the trading week as prices are right near a 29 month high.
Prices reacted very positively off of the crop report, which was released early in the week. Carryover levels for soybeans continue to decline, coupled with the strong demand from China's country as fundamentally and technically speaking, this market is strong. It looks to move even higher, in my opinion.
I have been recommending a bullish position from around the 9.14 level. If you took that trade, continue to place the stop loss under the 2 week low standing at 9.85 on a hard basis only as we were just an eyelash away from getting stopped out earlier in the trading week. If you take a look at the monthly chart, there is major resistance at 10.50. If that level is broken, I think we can head up to the $11 level. We will start to get real-time production numbers as the combines are in full swing in the Midwestern part of the United States as the volatility should continue to escalate to the upside.
CHART STRUCTURE: POOR
Soybean Meal Futures
Soybean meal futures in the December contract settled last Friday in Chicago at 338 a ton while currently trading at 352 as prices have hit a 27-month high continuing its bullish momentum higher for the 3rd consecutive session.
I have been recommending a bullish position over the last month from around the 299 level. If you took that trade, continue to place the stop loss under the 10-day low standing at 329 as an exit strategy. However, the chart structure will not improve for another 8 trading sessions; therefore, you will have to accept the monetary risk at this time. Presently soybean meal is the strongest trend to the upside out of all of the grain sector as strong demand from China has come back, and if you take a look at the monthly chart I think prices could head all the way up to the 400 level in the coming weeks ahead so stay long as I see no reason to be short.
I also have a bullish soybean and wheat recommendation. I think commodities across-the-board look to move higher as we enter 2021 as, historically speaking, prices still look relatively cheap.
CHART STRUCTURE: POOR
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.
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