Wednesday, April 05, 2006

Traders Helping Traders Big Weekend Edition - Part Two

That was a very unpleasant week. I'm one of those rare few who still have tonsils. About once a year I get a good dose of strep throat and they take the brunt of it. Some timely administration of antibiotics knocked it down over the course of 5 days. I think the weather has added to it. It's been very un-California like here with loads of rain and cold temps … that's relative I know … I'm sure I'll get no sympathy from you Midwesterners and east coasters.

I'm looking forward to a solid week of trading coming up for us. I like the looks of the charts with many of them at or in close proximity to major S&R levels. We are getting into tax time both income and property. This is typically a time of additional demands on our time and for some a time when we have a tendency to press our bets. If you don't have the time stand aside until you do. If you have some costs you need to cover do not try to do it on the back of your trading. Try as best you can to make it as "normal" an approach as you possibly can. I find it helpful to anticipate extraordinary time demands and plan accordingly.

I will probably take off a day or 2 per week during the next 2 weeks to deal with those demands. You should consider this as well. Trying to cram everything into the limited time leads to not giving the requisite effort to all that needs to be done. Plan around it, plan for it. You'll be better for it.

TRADE REVIEW

JUNE TBonds
I opened the day buying 109-03 and got stopped at -02 losing $31. I bought -03 a second time and exited at 109-10 for $218. Thru the mid part of the session we made a number of attempts to work higher at -07. I took a shot at selling getting filled at -06. I was hoping to get 5 or so from it but sort of lost my edge and exited at -03 for 3 more, $93.

JUNE Canadian $
We got CD sold at 8614 off the retest near 8620. I got stopped at 8604 for $100. We never had a look at anything after that.

JUNE Swiss Franc
I sold 7726 and exited at 7616 for $125. I sold 26 again, got stopped at 33 losing $87 and then sold 26 again getting out at 7618 for $100. I bought twice at 34 and got stopped on both at B/E. That was it for the day.

JUNE Mini Dow
I bought 11224 and exited at 45 for $105. I sold 11215 and exited at 11178 for $185. All done.

MAY Cotton
We sold 53.10 and exited at 52.75 for $175. I got another shot at selling 20 late in the session. We got filled at 53.15 and bailed at 52.75 again picking up an additional $200.

MAY Cocoa
Looking back at the Thursday close I decided to sell 1503. When we completed the long run down to 1481 I threw in the buy order getting filled at 1484 for $190.

MAY Wheat
I missed the first break higher. Mid day they gave us another shot. I bought 3.46 ¼ and exited at 3.48 for $87.

NEW TRADES
JUNE TBonds Bonds really have taken it on the chin the prior few sessions … since the notes to Tuesday's FOMC meeting were released. The trade was clearly expecting wording that at least hinted the rate increases were tapering off or more … that they were over. Instead we were treated to surprisingly hawkish comments that more would come. As a consequence they sucked 2 full points out of pricing. Friday's close at 109-05 sets up 109-00 and 109-16 as the focus of our trading for Monday morning. The quarters are in play after an initial trade off -00 or -16.

DECEMBER 06
Eurodollar I'm moving out to the December Contract for a number of reasons. Primarily to catch a bit more volatility and to get out beyond were I think we might be past the cycle of rate increases.

The charts for June and December look almost identical in appearance but about 5 points lower.

We're still faced with the lack of structure issue so there isn't much we can zero in on at this time. A return to 94.800 can be sold if we fail there or a break above can be bought. Given the current rate hike sentiment buying is a tough one to justify. I'll lay off the buy for the time being and reassess that question in subsequent Daily Updates.

JUNE Canadian $
I'm going to be selective in taking trades in the CD. We still are faced with a chart loaded with S&R levels packed tightly together which really presents problems for such a narrowly based trading regime. I'll buy a failed retest of 8540 or 8560 or any where in between that produces a turn north. Stops will be set at 8537, 8553 or 9557 … whatever makes the most sense in relation to the fill. 8660 is an obvious target level. There is strong resistance at each 20 interval on the way up. This will require some intense management to keep the trade in control operating with solid periodic RRR. Do the best you can with the view you have to work with. 8600 is another level I will take trades. I'll buy a break above with a stop at 8697 or sell a failed retest there with a stop at 8603. The sell target is 8540. I'll also play 8660, selling a failed retest with an 8663 stop or buying a break above 8660 with a stop at 8663. The target on the buy is 8760 but we need to be very protective of our position at 8700. This may be the best we can hope for on this buy so be very respectful. JUNE Swiss Franc We'll buy a retest of 7700 with a stop at 7693. I'll also sell a break below 7700 with the clear understanding that it will not likely make much. At best, the chart tells us, is a move to 7640 and more likely than not 7650 will signify the end of the road. The targets for the above trades are 7780 on buys and 7650 on sells.

I'll also buy a break above 7780 or sell a failed retest there. Stops are 7783 on the sell and 7777 on the buy. The target for this buy is 7840. Again like the sell at 7700 there isn't a lot in this trade so we need to ratchet up the management to make sense of it all.

JUNE 06 Mini Russell
Despite the specter of earnings robbing higher interest rates stocks making up the Russell 2000 continue to work higher. No buys are available to us above 753. We've added a few new numbers. Here are the numbers currently in play:

770, 763, 760, 756, 753, 750, 746, 744, 742, 740, 737, 735, 732, 730, 728, 725, 722, 720, 718, 715, 712, 710, 697, 692, 687, 685 and 680.

JUNE Mini Dow
Unlike the Russell Dow components are not doing as well under the weight of higher rates. Here are the current numbers in play:

11400, 11350, 11320, 11300, 11270, 11220, 11200, 11085, 11175, 11150, 11120, 11100, 11080, 11050, 11030, 11000, 10980, 10950, 10925, 10900, 10850, 10835, 10800 and 10750.

JUNE Gold
We move our Gold trading to the June contract beginning Monday. The charts have very much the same appearance with June trading about 5 bucks higher. The close on Friday was 586.70. We'll be after $10 Channel trades as usual. In addition, I will trade Gold off the 575 level as a straight S&R play … sell a break below, buy a failed retest there. Place stops at 575.70 on the sell and 574.30 on the buy.

MAY Cotton
We'll be looking for a retest of the recent lows. Probably the test and subsequent turn allowing us the buy will occur at 52.50 but it could come any where right down to 52.20 so we'll need to be fleet of foot to recognize and get the trade initiated. Place the stop at 52.17 if the fill is less than 52.50 something and 52.47 or 43 if it's above 52.50. I'll also buy a break above 53.20 or sell a retest there that fails to punch higher. Stops are 53.13 on the buy and 53.23 on the sell. Target for all buys is 55.00 and 52.20 for any sells. 53.50 is also a number I like. We'll play it both ways, selling a retest that fails as it starts lower or buying a break above. Targets are the same as above. Stop placement for the buy is 53.43 and 53.57 on the sell. Remember we are very sensitive to the end of long runs in Cotton, respect them or suffer the unpleasant consequences. We've seen enough evidence of this to have this concept firmly ingrained in our mind.

MAY 06 Cocoa
There is no doubt we're dealing with a channel bounded by 1480 and 1510. The channel contains 2 extraordinarily strong S&R levels at 1490 and 1500. which could grab control of the price flow and be the true reaction points. For now we'll concentrate on the 1510 and 1480. I'll buy a retest at 1480 that fails with a stop at 1477 or sell a break lower with a 1483 stop. The target for the sell is 1440 making it a marginal RRR trade. Assuming we get in about 1475 worst case we have risk of about $80 and a shot at a $350 return … just above 4:1. Very punctual management is required here. If you are delegating or otherwise not in a position to watch this trade very closely I'd suggest you pass. The target for the buy side is 1550. I'll also buy a break above 1510 with an 07 stop or sell a failed retest there with a stop at 1513. Use the same targets from above. This makes the buy at a 1510 break marginal RRR as well. Use the same guidance as suggested on the short trade above.

MAY Corn
The planting intentions released by USDA showed much lower than expected plantings for Corn acreage. Coupled with some demand info it sent Corn soaring at the open. Even though we pulled back 7 cents from the opening highs we still wound up the day 8 cents higher. Friday's big pop makes the chart very suspect. I will sell a retest at 2.40 as it fails. I will also sell a break below 2.35. There is no buy I'm comfortable with until we see 2.28 trade. Do not succumb to the temptation to jump on the band wagon. Take it one day at a time and trade it smart. The whips are coming.

MAY Wheat
The action in Wheat was higher but nothing on the magnitude of Corn. Planting intentions were lower but not as pronounced. 3.50 is the key number for me for Monday. We'll sell a failure there or buy on a break above. I'll also sell a break below 3.45 or buy a failure to punch lower from there as it turns back north. That's it for this edition.

-Tom .

THT Trade Update for Tuesday April 4th 2006

Erich's Update for Tuesday, April 4, 2006
Hot off the commodity presses to you! "Don't let the fear of the time it will take to accomplish something stand in the way of your doing it. The time will pass anyway; we might just as well put that passing time to the best possible use." ~Earl Nightingale


1: CURRENCIES

June Australian Dollar ADM6
Do we dare sell the AD again tomorrow? This market handed us a serious thrashing last week, but today we get another sell signal as rates bounce off resistance near the 20 day moving average and RSI hooks. Technically this market is still in a downtrend with all indications that the recent rally was a pullback.

*SELL June Australian Dollar at 7127
*Exit Stop: 7163
*Approximate Risk: $360 per contract
*Profit Target: 6903
*Potential Profit: $2240 per contract
*RRR: 6:1
*Degree of Risk: HIGH

June British Pound BPM6
A big bounce in the Pound today. Did you notice that it came off of trendline support? This market is still stuck in a sideways range so I'm not trading it right now.

June Canadian Dollar CDM6
Right idea in the Canadian Dollar (again) but the market gapped our entry (again) voiding our trade (again). Nothing new here tomorrow (again).

June EuroFX ECM6
Like the Pound, the EC is stuck in a range; however after today's bounce I'd say we're looking for something higher tomorrow.

June Japanese Yen JYM6
A gap lower in the Yen today as the market moved slightly lower, but closed high. Those gaps are scary, otherwise I'd be looking to sell tomorrow below support at 8525.

June Mexican Peso MPM6
It looks like I made the Peso trade a touch too tight as the market whipped us out of our trade today. I will try it again tomorrow, but give it a little bit more room. Hopefully we'll get a better result.

*SELL June Mexican Peso at 90.875 *Exit Stop: 91.525 *Approximate Risk: $325 per contract *Profit Target: 88.525 *Potential Profit: $1175 per contract *RRR: 3 1/2:1 *Degree of Risk: Moderate to HIGH

June Swiss Franc SFM6
A gap and fade in the Swiss Franc as well. Nothing for me here tomorrow.

June US Dollar Index DXM6
I'm not too happy about the weak trend and choppy trading we have in the USD right now, but the support at 8920 is a monster, so I'll look at selling a breakout through here tomorrow.

*SELL June US Dollar Index at 8913
*Exit Stop: 8953
*Approximate Risk: $400 per contract
*Profit Target: 8757
*Potential Profit: $775 per contract
*RRR: 3 1/2:1
*Degree of Risk: HIGH


To get the rest of the markets BEFORE the OPEN in all the major commodity sectors, analyzed in detail with entries, exits, stops and trade management day by day...go to http://www.supportandresistance.com/subscribe.html

Same applies to Tom's Trades, a sampling of which you can read below:

"Tom's Trades" for Tuesday, April 4, 2006

1: JUNE 30 YEAR T BOND
I sold -27 and was stopped at B/E. I then bought -25 based on the action, or lack thereof more accurately, at -22/-23. I got stopped out at B/E on this one too. I looked at selling the next break below -28 but passed based on the previous inability to break -24. Tried to buy -25 but couldn't get it. I bought -03 and got stopped at B/E again. Bought -03 and exited at -06 for $93. I then sold -07 on the failure to break -08 and exited at -03 for $125. Tough day to say the least.

Today closed at 109-01 so we'll focus on 109-16 and 109-00. After a first trade at -00 or -16 we are free to pursue quarters.


2: DECEMBER 06 EURODOLLAR
My hands are tied for the moment.


3: JUNE CANADIAN DOLLAR
We bought 8544 and exited at 8559 for $150. We'll stay on the TT weekend numbers for tomorrow.


4: JUNE SWISS FRANC
We opened up with a buy at 7704 which we exited 7728 on a "once broken" play at 7730. We made off with $300. Same TT weekend numbers for tomorrow.


5: JUNE MINI RUSSELL 2000
We began selling the break of 770 at 769.50 and exited at 768.10 on a "once broken" for $140. From there we climbed to what turned out to be the day's high at 775. I sold 769.40 and exited at 769.80 losing $40. I came right back and sold 769.60 and exited "OB" at 765.10 for $450. All the numbers for tomorrow plus we add 768.

5: JUNE MINI $5 DOW

I bought 11226 and exited at 11283 for $285. I then bought 11275 and exited at 11300 for $125. I sold 11296 and exited at 11221 for $375. A daily total of $785 makes it one of the better DOW days in a while and very welcome given the Bond fiasco today. All the numbers from yesterday


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