Monday, October 02, 2006

Traders Helping Traders Big Weekend Edition - Part Two

Tom's Trades By R. Thomas Logé

The Day Fire is all but out after burning for a solid month and consuming 254 square miles of brush and timber. It is testimony to the amazing work of firefighters that only one house was lost.

The fire robbed me of 2 days of trading but we came back for the final 3 and did pretty well all things considered.

That's another benefit of the way we trade, picking predetermined price levels rather than chasing after each day's price flow. We can leave the markets for a day or 2 or even more and come right back without feeling we lost touch.

I'm going to dig right in and get after the game plan for next week.

NEW TRADES

DECEMBER TBonds

The coming week is light on reports with 2 exceptions. On Monday we start off with a heavyweight in the form of the ISM report on manufacturing activity. Analysts expect a reading around 53.5; maybe a bit higher after Chicago's regional reading on Friday. On Friday we'll cap the week with the employment report. Since it is the only report Friday it may have even greater weight than normal so be wary.

The close on Friday at 112-13 ended the week on a sour note for bulls. I think we'll open the week with more weakness and tread water from there all week. We'll be watching for opportunities at 112-16 and 112-00 to began the week.

DECEMBER Eurodollar

I'm still short from .695 from Thursday. The stop is at B/E now. I'm thinking we have a shot at seeing .620 and maybe even .580. Periodic RRR is going to dictate how this trade concludes. If I weren't involved in this short trade I'd be looking at selling a break below .660 with a stop at .675.

DECEMBER Canadian $

In Thursday's Daily Update I added 9040 and 9020 to the mix of playable numbers. We'll play either way now off all 4 numbers … 9040, 9030, 8980 and 8940. For buys at 9020 or 40 we'll look at 9080 as a target. For sells we'll look at 8940 and hope to get thru there to open up the 8860 target discussed below.

We have two primary lines in the sand to contemplate Monday morning … 8980 and 8940. We'll buy the break above 8980, sell the break below 8940 or sell the failed retest at 8980 or buy the failed retest at 8940. I'll also play at 8920 either way dependent on the appropriate whisper there. Targets are 8860 on any sell and as much as I'd like to say 9040 on the buy the real "what's most likely" is 9020. That makes the buy at 8980 a very small trade with less than a $400 profit potential.

The stops will be on the same basis we've been using for sometime now … on buy trades they go at the next lower XXX7 and on sells they are at the next higher XXX3. We'll be risking only about $80-$100 on the 8980 buy but that barely yields a 4:1 RRR. If you take the buy there you can't leave it out of your sight for even a minute.

DECEMBER Swiss Franc

We're right back where we were week before last.

I'll take a flyer at 8060 either buying the break higher or selling the failed retest there.

Target for the buy is 8160 and for no good reason, 8000 on the sell. Any trade done here needs to be rolled to B/E very quickly about 10 ticks I imagine.

The stops will be on the same basis we've been using for sometime now … on buy trades they go at the next lower XXX7 and on sells they are at the next higher XXX3.

DECEMBER Mini Russell

The market played out almost as we predicted last week. I had it pegged at 2 up and then 3 down, we actually did 3 days of up and then 2 down. We're going to stay strong but suffer a bit in trying to gain and hold new altitude. This will likely be a frustrating week for us as we keep bumping above price levels we can play. I can't add any new numbers on the high side yet so we'll probably be handicapped in buying some of the spikes we'll inevitably see.

I think it's going to be quite taxing to play the markets both ways capitalizing on both buy and sell trades. Some of you may find it more comfortable to ambush only buys on pullbacks.

Here are the numbers currently in play for the December contract with the addition of 742 and 740:

742, 740, 738, 735, 732, 730, 726, 722, 718, 715, 712, 710, 706, 704, 702, 700, 698, 696, 694, 690, 688 and 680.

DECEMBER Mini Dow

The DOW clearly has been less riddled by volatility than has the Russell. It has been a much smother ascent to current levels. The DOW is going to be a difficult play fir us exactly for those reasons.

Here are the current numbers in play for the DOW:

11775, 11750, 11700, 11620, 11600, 11580, 11550, 11500, 11475, 11440, 11400, 11370, 11350, 11330, 11300, 11240, 11200, 11170, 11150, 11050, 11000, 10970, 10950 and 10850.

DECEMBER Gold

I think the coming weeks will play out very well for our $10 Channel theory. I see gold becoming more and more a creature of range and less and less able to make sustained moves in one direction. This tendency coupled with the Channel play should reap benefits for us throughout the week.

DECEMBER Cotton

We made the plunge below 51.60. There isn't a thing down here that gives us an ability to read a course of action. I'm going to play only at 51.60 and only by buying a break higher. The stop is 51.53. The target is 52.60 with an aggressive roll at 52.00.

The trade will more than likely terminate on the end of a long run or as a result of periodic RRR considerations as opposed to arriving at a target.

DECEMBER Cocoa

There is evidence of support at several price levels from 1460 to 1480. I'm going to play only 1470. I will buy a break higher or a failed retest there. The stop will be 1467 and I'm looking at a target of 1530 - 1540. 1480. 90, 1500, 1510 and 1520 all command respect worthy of a roll. I don't think you can manage this market that tight so again mixing periodic RRR with the S&R will be the likely way to go.

I think I'll sell Cocoa on a failure up at 1500/1510 with a stop at 1513 or 03 depending on the fill price.

DECEMBER Corn

My first line in the sand comes at 2.68. I will buy a break higher; I would prefer to sell a failed retest there as it turns and heads back south.

I'll sell a failed retest at 2.65 1/2 - 2.66. I will not buy the break higher from there. I'll also sell the break lower at 2.62.

2.52 and 2.54 are also levels I'll play. I'll look to sell breaks lower at either number or buy any failures there. These are pretty much the first buy levels I'm comfortable with outside of the buy of the break higher at 2.68

These are all scalps so the penny and a quarter rolls and stops are in play.

DECEMBER Wheat

Wheat has been on a 2 week plus pattern of alternating up and down days. The ups have non the less out paced the downs as Wheat added 65 cents to price. Monday will determine whether the pattern repeats or not. We'd expect an up day. I really think we'll be down.

I'm going to play 4.41 selling the break there. It is a scalp trade so the stop is a penny and a quarter as are the rolls.

Tom