Week 7: What Went Right

As I had mentioned in my last post, I had wanted to try staying in my trade for a longer period.  Based on Andrew’s presentation on technical analysis, I tried to devise a long term strategy and got into 2 long soybean contracts on Monday and stayed in until Friday. Although the prices fluctuated all week, I realized a net gain of $1850 on each contract as soybean prices rose $0.37 this week.

This week my trade was all about technical analysis. To do that, I honed in on the price charts for this past year and the last 6 months to try to find identifiable shapes like the head and shoulders, ascending and descending triangles and so forth. I noticed somewhat of a ‘head-shoulders’ shape which started in July this year, reached the peak of the left shoulder in mid-July, then reached the peak of the head in September, and finally, reached the peak of the right shoulder in November. By mid-November, prices had already dipped to July levels. So, at the start of the week, I had to make the decision of whether to go long or short. I figured that since traders will like to seize this low price, they will go long to lock in some profits. Also, since the ‘left shoulder’ isn’t too well defined, perhaps what we are seeing is instead an inverted head and shoulders, where the left side of the inverted shoulder happened in mid-October, and the current November prices are the lowest point of the inverted head. In this case as well, one would expect prices to go up before the ‘right shoulder’ appears. For this reason, I went long and realized some gains as a result.

Chart from: http://online.wsj.com/mdc/public/page/mdc_commodities.html?refresh=on