Traders Helping Traders Daily Update for Wednesday, 5-18-05

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Erich's Update for Wednesday, May 18, 2005
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Scroll down for Tom's Trades! There is a particularly interesting commentary at the beginning for today.
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FYI
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I'm out of town Tuesday through Thursday this week so the nightly updates are likely to be a little later than usual. I apologize for any inconvenience.

-Erich
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1: JULY CORN
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CN5 O=6 1/4 HI=7 3/4 LO=5 1/2 CL=7 1/2

Nearly the identical range to yesterday as corn reinforced both resistance at 207 - 208 and support at 205. I'm still looking for a chance to sell and would consider a lower session tomorrow as my shorting signal.

Watching and waiting for now.
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2: JULY COTTON
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CTN5 O=70 HI=15 LO=45 CL=06

Anyone still have any questions as to whether support and resistance works or not? Did you notice today's low in the cotton market? Yep, 5045 (close enough to 5050 for me)...and did you notice what the market did after hitting 5050? Yessiree, a big bounce.

If you didn't exit at the 5050 target then you don't want to give this market an inch tomorrow and get those stops above the high. If you did exit at 5050 then you picked up about $2000 per contract in this home-run trade.
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3: JULY BEAN OIL
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BON5 O=05 HI=08 LO=86 CL=02

A halfhearted attempt by bean oil to head lower today as prices rallied by the close. I'm bring the exit stop down to just above the 2210 area. If the market takes out today's high I'll just take my accumulated profit and go.

Next target is support at 2161.
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4: JUNE LIVE CATTLE
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LCM5 O=80 HI=20 LO=80 CL=07.5

Cattle, you dog! Cattle prices made a smallish range today as prices were reluctant to head any higher or lower. There's a cattle on feed report out Friday so if we don't get filled tomorrow I'm pulling the trade until then.

Notice it's a little riskier than it was yesterday.

*SELL June Live Cattle at 8672
*Stop 8717
*Approximate Risk Exposure: $180 per contract
*Profit Target: 8505
*Approximate Profit Potential: $670 per contract
*RRR: 3 1/2:1
*Degree of Risk: HIGH
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5: JULY COCOA
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CCN5 O=48 HI=49 LO=35 CL=38

A little dip in cocoa today, but nothing I'm getting too excited about just yet. I was hoping to see prices test the resistance at 1470 - 1480 a bit before falling off again.

If you're still short this market time to bring in exit stops to above today's high. If the market trades through here then you're probably better off leaving.
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6: JULY WHEAT
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WN5 O=06 1/2 HI=12 LO=06 1/4 CL=10

Good day for the wheat bulls as prices rallied a bit but don't let today's action fool you, there's considerable resistance above the market, both on today's high and nearby at 317 and if the market gets to 317 we'll be all over selling it again.

Patience...patience.
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7: JUNE CANADIAN DOLLAR
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CDM5 O=74 HI=21 LO=59 CL=02

Sometimes I'm even amazed at how well support and resistance works. Did you see today's Canadian Dollar market? Did the market not bounce right where we said it would? Amazing, don't you think?

In spite of the fact that the large ranges and gaps kept us out of this trade it's still nice to see a market respecting S&R. Look for rates to increase a bit over the near term, but another big tank could be coming soon, so keep your selling orders nearby.
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8: JULY SILVER
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SIN5 O=6.5 HI=8.5 LO=5 CL=4.5

Okay, so prices fudged the 705 resistance a bit today and traded to 708 before topping out. Do you see the support on the low? This is an important resistance level for prices to break if they're going to head lower.

Yes, I'm still selling silver because the market is in a downtrend. Last week we got in a day too early so I'll give the market tomorrow to sort itself out...I just hope it doesn't run away on me!
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9: MARCH EURODOLLAR
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EDH6 O=.00 HI=.055 LO=.965 CL=.015

Nuts. It isn't often that the ED whipsaws us, but that's what happened today in this aimless market. A reversal is coming...I can feel it in my bones, but the ED's being a little coy about giving us a suitable clue so I guess we'll just have to sit it out tomorrow and wait.
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10: WILD CARD
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No wild card market for tomorrow.
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"Tom's Trades" for Wednesday, May 18, 2005
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Just a short preface to todays update. First, let me apologize to those who have emailed me in the last 3 weeks and are still awaiting a reply.

Between Jacki's surgery and the accompanying responsibilities of keeping her business on track, trading, writing the updates and Tom's trades, the busiest time of the year at the college, Father in laws' further slipping requiring arrangements for 24/7 care and, finally, my sister having a heart attack ... she's 6 years younger than I, that was fun to think about ... I've had to do some serious juggling.

The emails and my posting have been the primary sufferers of the demands. The grind wears on ya', huh kids? Things are getting back to normal, so please bear with me.

I did get a couple of emails along a parallel theme I thought worth sharing. The jist was that it seems like I haven't been hitting very many trades here lately and they cited Gold among a few other markets as examples. Points well taken. I'd be the first to acknowledge my reflexes have been a little slow in catching some market moves. Likewise that some markets are not producing the normal frequency of trades. While some of this is attributable to the factors enumerated above there is a deeper issue to be examined here.

First, ignore the fact that if you look at the total take each week it isn't that far off the benchmark of weeks from any other time period in my trading. Everything moves in cycles, everything ebbs and flows ... everything. These cycles impact markets, methods, strategies, rules ... and even people.

It is important knowledge to understand this factor exists. I know the pendulum swings east, west, south and north. It is an identifiable characteristic of disciplined trading. You may never see them or at least not with necessary clarity if you are essentially looking to trade every day, every session, essentially talking yourself into trades thru constant analysis with each day's close as a beginning point.

With this mentality you will never see the cycles, the ebbs and flows. It is only visible, in my opinion, to those traders who have evolved to a point where they do not use the analytical process as a "chase vehicle" to pursue what they perceive to be trading opportunities which are, in truth, just the best available today not necessarily the best trades.

We must get to a point where we decide where we trade and if it isn't there we take comfort in that fact, not treat it as some curse laid upon us by the hand of the trading gods. If you are finding a trade every day, regardless whether or not you take it, but you are doing analysis every day and finding a trade that COULD be done ... you're trading plan has room to improve ... this is the mentality of beginners ... pick a chart, any chart ... to paraphrase the old magicians mantra ... and I'll show you a trade, better yet, I'm so proficient with charts and knowledgable about indicator useage I'll show you THEE trade du jour. Periless conduct.

Recognition that there is NO trade is essential to a long term winning proposition. Having the discipline to ride this horse will allow cycles to appear and become useful tools for you. I hope you all enjoy this edition. It is a labor of love I delight in sharing with you all.
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1: JUNE 30 YEAR T BOND
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USDM5 O=5-14 HI=6-00 LO=5-08 CL=5-24

The move of the day was, no doubt, the buy ... oh well, back to the drawing board. My self imposed rule left me sitting, wiping the drool from the corners of my mouth. I sold -29 after the peak and was stopped at 24 for 5 ticks. By then we were into the final hour and done for the day.

We ended the day at 115-24 so the focus is again on 116-00, 115-24 and 115-16.

The bonds have been giving us some daily range so you'll note I have been less fixed on trading -24 and -08. Our experimentation worked reasonably well. I will NOT play them as frequently as I'd done in the past 2 weeks but will not hesitate to do so if the setup is overtly obvious. I will also play the buy off a retest of 115-00 and probably -08 as well.
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2: JUNE EURODOLLAR
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EDM5 O=.575 HI=.582 LO=.572 CL=.577

Not enough movement to move me either way. We'll sit tight.
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3: JUNE CANADIAN DOLLAR
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CDM5 O=74 HI=21 LO=59 CL=02

Still watching structure grow, nice little reebound.
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4: JUNE MINI RUSSELL 2000
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ERTM5 O=3.20 HI=6.90 LO=7.50 CL=6.90

Iwas pretty frustrated at the start of our trading window. I sold 590.70. We dropped and snapped right back. I reversed at 591.40 losing $70 and then exited at 592 almost erasing the loss. Next up I sold 590.80 and exited at 588.70 for $210. It was apparent we'd lost the momentum of the slide south. It unfortunately was not close enough to 586 to allow a reverse. I then bought 590.30 and exited at 590.20 losing $10. Next, I sold 589.70, exited at 589 making $70. For the final shot of the day I bought at 590.50. I was getting on guard the closer we got to 597. It never got there but all the symptoms of a failure just below it were self evident. I jumped ship at 596.40 pocketing a nice $590.

The full array from TT are in play for tomorrow.
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5: JUNE GOLD
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GCM5 O=0.10 HI=1.50 LO=9.30 CL=9.80

Nothing there for us today. It's trying to decide 420-30 or 420-10. The preponderance of evidence looks like it may be 420-410 especially after today's session ending dive.

$10 channel for tomorrow.
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6: JULY COTTON
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CTN5 O=.70 HI=.15 LO=.45 CL=.06

If you just looked at the closing price and saw Cotton up 5 points on the day you really didn't get the full story did ya'? Good ol' Cotton ... always good for some fireworks. The gap down was just enough to keep us sidelined.

With the close at 52.06 we're poised for action tomorrow off 52.00. Here's the scoop from yesterday which we'll follow for tomorrow. Sell a break below 52.00 with a stop at 52.11 and a B/E roll at 51.90 or 11 points below the fill. You can sell anything in the way of a break down to .85. We'll buy a retest of 52.00 that fails and begins moving higher with a stop at 51.93 and a B/E roll at 52.11. Target on the sell is 49.00 and 54 on the buy. We are in a down trend, no doubt, but this level between 51.50 and 52.00 has been a pretty effective turning point protecting the downside and today acted very much the roll of magnetic pole yanking prices right back to it ... unmistakable power.
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7: JULY COCOA
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CON5 O=48 HI=49 LO=35 CL=38

Cocoa price action is taking on the look of a bottom forming up. We need a good bit more structure to declare it so officially. I'll continue to monitor price action watching the structure build sufficiently strong enough to trade or for a return to 1480.
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8: JULY CORN
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CN5 O=2.06 1/4 HI=2.07 3/4 LO=2.05 1/2 CL=2.07 1/2

Still very much witht he scalper mentality in play I bought 2.05 3/4 and took it home with me at end of session. I have the stop working all sessions at 2.06 1/4 so theoretically I can't lose ... at least not until the gap down open:) A little trader humor there for ya'. I also have a limit order to sell at 2.09 3/4 to grab profits if we happen to get a boost that high over night ... I doubt that'll happen but be prepared is a decent model to follow.

Focus for tomorrow is 2.05 and 2.10. I'm still very much in scalp mode so I'll play either number either way ... buy or sell breaks and failed retests
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9: MAY WHEAT
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WN5 O=3.06 1/2 HI=3.12 LO=3.06 1/4 CL=3.10

I bought 3.08 1/2 fully expecting 3.12 to end the bump up. I had designs on holding this overnight as well as the Corn. However as we climbed the ladder to 3.12 and tuched it we suddenly, but not unexpectedly got a big dose of red candles. It was an engraved announcement the move was at an end ... I bailed at 3.11 1/2 picking up 3 cents, $150 with very little drama involved.

For tomorrow I'll play the 3.04 buy again as well as buying a break above 3.08 even with 3.12 looming overhead. You can bet I'll be rolled tight as a sow bug there though.