Traders Helping Traders Big Weekend Edition

Traders Helping Traders E-zine for May 24th, 2009

Shooting the Breeze!


May is a great time to be a Canadian trader. Why? Because in May I get to take advantage of two holiday weekends! Last weekend was Victoria Day long weekend in Canada, which means the stores were closed and no one was working, and this weekend is Memorial Day in the US, which means the markets will be closed on Monday.

Most of the US/Canadian holidays coincide except for Victoria Day/Memorial Day, Canada Day/Independence Day and Canada/US Thanksgiving's; three times a year I get to sneak an extra "day off", or at least that's what it feels like to me.

Memorial Day weekend is also the time we normally celebrate my friend Bob's Birthday. That's what we were doing this weekend as Bob turned 46. Bob's b-day is always a big deal because of the extravagance of his parties. You better make sure you come hungry and thirsty because from the time you come in the door to the time you leave the food and beverages never stop.

Bob's originally from the east coast so he almost always has a lobster dish of some sort and this year was no exception as he had a tremendous lobster-crab-shrimp-spread that was to die for. There was plenty of traditional summer fare such as potato salad and chicken wings (three different kinds) but some non-traditional foods as well like ginger sesame meatballs and ham and cheese mini-quiches.

Most impressive of all was that all the food was made from scratch by Bob. He's not a professional chef, but he can certainly cook like one. To top everything off there were gallons of his famous (or infamous) sangria. All in all about 50 of his closest friends were there to celebrate the occasion and what a party it was.

We intended to only stay for about 4 hours but 9 hours later, well after midnight, we're finally leaving. Good thing he likes us, or we might not get invited back next year!

No videos this week, it will only be a print edition. Next weekend's edition will be back to normal with videos on all the markets we're trading.

Enjoy this week's issue,

Erich
erich@tradershelpingtraders.net
 

Currencies


Currencies Market Overview

In hindsight the British Pound was a good countertrend trade to take as the market took off last week making significant gains. Many of the currency markets rallied last week sending the US Dollar lower as a result. While I missed the Pound rally I did mange to grab the USD Index's dip and put just over $1200 in the bank before the weekend.

Now that the currencies have picked their directions we'll probably see more of the same; however you'll want to note that some consolidation has already begun and the ranges are getting smaller. This means we are likely to get a pullback move, maybe even this week, which would be good news for us, giving us another chance to get into the markets.

FLAT Currency Complex

The charts in this publication are all made using Gecko's Track 'n Trade charting software. You can try it for free here.
 

Financials


Financials/Indices Market Overview

It seems like months since I "forecast" that the Index markets are due for a correction, but to date it hasn't happened – yet. That's why I feel like a broken record when I suggest it again this week. What different? Not that much but momentum has dried up to a trickle.

The lack of momentum and subsequent divergence favours a move lower as do the smaller ranges. As the saying goes "you have to feed a bear market" meaning that in order for prices to continue to rise, there has to be something pushing them higher. Without this impetus, "gravity" will take over and price will fall simply out of lack of momentum/interest if for no other reason.

Technically trying to sell the market from here is not countertrend as we're still pretty much in a downtrend, with sideways tendencies. Resistance re-established itself last week, so the real challenge will be getting below the current lows. A break below here should see at least a short term move lower, but the opinion of many in the stock community is that this might not be the final bottom!

Personally I think we have found a bottom; however before I get too anxious about being a buyer I have to see a serious testing of support that holds, ideally one that threatens the lows, and a subsequent failure of resistance [hint: if you haven't done the homework from last week this is a darn good clue to the answer!] before I can say with any degree of certainty that we're in an uptrend.

I just going in for a hit 'n run style trade this week. Why don't I try for a bigger move? Well, if you can be certain that this is the time the market's ready to ditch then I'm all for it! Myself, I suspect it could be so, but I'm not so sure.

mini-Dow

If June mini-Dow opens at or above 8200
SELL June mini-Dow at 8177 (stop)(day)
If filled: Exit Stop: 8453 (stop)(GTC)
Approximate Risk: $1380 per contract
Profit Target: 8017 (limit)(GTC)
Approximate Profit: $800 per contract
Degree of Risk: Moderate to HIGH.


 

Grains


Grains Market Overview

The grains are starting to act a little better after shutting us out for the last couple of week. The big thing here is the apparent shift in momentum as old support seems to be holding and resistance is giving way – indicating an uptrend [wait a minute...is that another hint to the homework question?!?]

Corn and wheat are the most bullish looking this week but I have to admit I'm always a little apprehensive about trading at these reactionary levels. It's not uncommon for a market to poke through the resistance zone only to double back on itself. But in this instance I think we'll be alright because we have building momentum as well. If fact rising momentum is so important that I never try to do a trade with out it (and when I do I usually regret it!)

Corn and wheat's charts are pretty much identical so you can trade either market or both. I'll be trading the mini-contracts to keep the risk amounts down but you can consider taking as many multiple contracts as you can afford.

On a different note, Soybeans look like they might have temporarily topped out last week as many in the soy complex formed resistance. Toss in falling momentum and you're almost guaranteed a pullback move of some sort this week.

mini - Corn

If July mini-Corn opens at or below 433
BUY July mini-Corn at 436 3/4 (stop)(day)
If filled: Exit Stop: 416 3/4 (stop)(GTC)
Approximate Risk: $200 per contract
Profit Target: 463 3/4 (limit)(GTC)
Approximate Profit: $270 per contract
Degree of Risk: Moderate to HIGH



mini - Wheat

If July mini-Wheat opens at or below 616
BUY July mini-Wheat at 624 3/4 (stop)(day)
If filled: Exit Stop: 593 1/4 (GTC)( stop)
Approximate Risk: $285 per contract
Profit Target: 643 1/4 (limit)(GTC)
Approximate Profit: $215 per contract
Degree of Risk: Moderate to HIGH.


 

Meats


Meats Market Overview

Not a good week for my Feeder Cattle trade which left me floundering all week. As you know I'm not found of stagnant markets, but that's the mess I find myself in right now. What really ticks me off is that I was getting "cute" with the trade which is why I took a countertrend move. If I do get stopped out I'll consider reversing the trade.

Feeder Cattle

CONTNIUATION of Short August Feeder Cattle at 100.85 (May 20)
Exit Stop: 102.35 (stop)(GTC)
Approximate Risk: $750 per contract
Profit Target: 99.60 (limit)(GTC)
Approximate Profit: $625 per contract
Degree of Risk: HIGH


 

Metals


Metals Market Overview

Gold and Silver both posted nice rallies last week spurred higher by the meltdown in the USD and the continued uncertainty in the Stock market. All these factors pressure the economy lower but it has the opposite effect on the precious metal market and sends them higher as people search for a secure investment.

Our problem right now is that the market is already underway and as such I have to wait for support/resistance to form before I can safely jump back in. I don't think I'll have to wait too long however. The market already seems to be looking over it's shoulder to see how many buy orders are back there!

FLAT Metal Complex
 

Softs


Softs Market Overview

Our OJ trade isn't doing so hot either as the market went quiet shortly after filling us. To make matters worse we saw support come in last Friday with prices moving higher. I have a bad feeling that this will kill our short position, but all is not lost – yet. There is still hope that this is all the bulls have left and that the preceding momentum will take over and try to push prices down again. I'll continue to run the tight profit target, but overall I'm not holding out too much hope here.

CONTINUATION of Short July OJ at 8930 (May 18)
Exit Stop: 9385 (stop)(GTC)
Approximate Risk: $675 per contract
Profit Target: 8730 (limit)(GTC)
Approximate Profit: $300 per contract
Degree of Risk: HIGH

The charts in this publication are all made using Gecko's Track 'n Trade charting software. You can get a demo for free here.
 

Pick of the Letter


Pick #3 – BUY July Corn

A good setup in Corn, but if I had to choose I would probably take the Wheat trade over the Corn trade as Wheat is trading off harder resistance.

Pick #2 – SELL July mini-Dow

Yes, I know I can't leave it alone and I'll be much better once we get the pullback phase, but right now I'm having a tough time considering being a buyer here.

Pick #1 – SELL July mini-Wheat

Wheat's trading off some pretty solid numbers right now so it is likely that price will continue to rally this week.
 

Lesson du Jour


I'll give you a detailed explanation in the next video. In the meantime, if you haven't done the homework yet...

Question: Take a look at these two charts and tell me which way the market is trending in each?

Homework Chart 1

Homework Chart 2
 

Futures Trading is Risky! Never trade with money you cannot afford to lose!


Nothing in this publication is either a solicitation to trade or a recommendation of any strategy. Always consult your broker or advisor before attempting any trade. Commodity trading involves substantial risk of loss.

THE DATA CONTAINED HERE IN ARE BELIEVED TO BE RELIABLE BUT CANNOT BE GUARANTEED AS TO RELIABILITY, ACCURACY OR COMPLETENESS; AND AS SUCH ARE SUBJECT TO CHANGE WITHOUT NOTICE. TRADERS HELPING TRADERS AND IT'S ASSOCIATES WILL NOT BE RESPONSIBLE FOR ANYTHING WHICH MAY RESULT FROM RELIANCE ON THIS DATA OR THE OPINIONS EXPRESSED HEREIN.

DISCLOSURE OF RISK: THE RISK OF LOSS IN TRADING FUTURES AND OPTIONS CAN BE SUBSTANTIAL; THEREFORE, ONLY GENUINE RISK FUNDS SHOULD BE USED. FUTURES AND OPTIONS MAY NOT BE SUITABLE INVESTMENTS FOR ALL INDIVIDUALS, AND INDIVIDUALS SHOULD CAREFULLY CONSIDER THEIR FINANCIAL CONDITION IN DECIDING WHETHER TO TRADE. OPTION TRADERS SHOULD BE AWARE THAT THE EXERCISE OF A LONG OPTION WOULD RESULT IN A FUTURES POSITION.

NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL, OR IS LIKELY TO, ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN. IN FACT, THERE ARE FREQUENTLY SHARP DIFFERENCES BETWEEN HYPOTHETICAL PERFORMANCE RESULTS AND THE ACTUAL RESULTS SUBSEQUENTLY ACHIEVED BY ANY PARTICULAR TRADING PROGRAM.

HYPOTHETICAL PERFORMANCE RESULTS HAVE MANY INHERENT LIMITATIONS, SOME OF WHICH ARE DESCRIBED BELOW.

ONE OF THE LIMITATIONS OF HYPOTHETICAL PERFORMANCE RESULTS IS THAT THEY ARE GENERALLY PREPARED WITH THE BENEFIT OF HINDSIGHT. IN ADDITION, HYPOTHETICAL TRADING DOES NOT INVOLVE FINANCIAL RISK, AND NO HYPOTHETICAL TRADING RECORD CAN COMPLETELY ACCOUNT FOR THE IMPACT OF FINANCIAL RISK IN ACTUAL TRADING. FOR EXAMPLE, THE ABILITY TO WITHSTAND LOSSES OR TO ADHERE TO A PARTICULAR TRADING PROGRAM, IN SPITE OF TRADING LOSSES, ARE MATERIAL POINTS WHICH CAN ALSO ADVERSELY AFFECT ACTUAL TRADING RESULTS. THERE ARE NUMEROUS OTHER FACTORS RELATED TO THE MARKETS, IN GENERAL, OR TO THE IMPLEMENTATION OF ANY SPECIFIC TRADING PROGRAM WHICH CANNOT BE FULLY ACCOUNTED FOR IN THE PREPARATION OF HYPOTHETICAL PERFORMANCE RESULTS AND ALL OF WHICH CAN ADVERSELY AFFECT ACTUAL TRADING RESULTS.
 

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