The last week of trading game has sent me up to heaven and thrown me down to hell at the end. A lot of things have happened this week. At the beginning of the week, price of sugar continued to rise. Sugar was performing really well. I was gaining almost 7% of return at one point. I was literally in heaven. But I gave in to my greed and failed to sell it when it’s profitable. Now, the price of sugar has tumbled down to 0.1460 cents/bushel. As a result, I lost 2.32% from sugar.

But I managed to make one good decision this week. I finally offset my long position on wheat and had reaped a small profit of $662.5 at the price level of $5.25/bushel, which was very close to its price resistance level at $5.28. This turned out to be a good call because the price of wheat as I had predicted, tumbled down to $5.01 at the market closing price today.

Hoping to increase my portfolio value even more, I made a few transactions. In fact, some very bad transactions. I took three additional short contracts on Cacao, Coffee, and Cotton on early Friday morning. I was planning to cover these contracts on that day when the price would drop. However, since the prices were moving in the opposite way from what I would expect them to, I decided to hold on. But the prices are not getting any better so far.

Nevertheless, it has been a great experience to be able to participate in this commodity trading game. I think I am a better and well informed trader now than when I was at the first week. As of today, my portfolio value has decreased by 2.99%. This was partly because of my lack of discipline in my trading strategy. My worst enemy is indeed no one but myself.

Things that I find very useful in my trading strategy are these two websites: Barchart.com and Agrimoney.com. The latest news on commodity agriculture on Agrimoney.com helps my fundamental analysis. Barchart.com also another website that I rely on a lot. The website shows the price chart on weekly, daily and yearly basis for many commodities. It also provides a brief overview of what’s the current market trend on each commodity. I also find the trader cheat sheet page very useful to identify the price resistance and support level so that I know when to pull myself out from a trade.

Although this will be my last blog entry about my trading experience on StockTrak, it certainly will not be my last journey of trading commodity. I’m hopeful this overall experience will be the starting point of another more challenging trading opportunity in the near future.

Cheering on the Bulls and Bears at 141 W Jackson Blvd, Chicago, Happy trading,

O

 

Some weeks ago, I was thinking to do a couple of day tradings to gain quick profit. But I have never done it to this day as I always get greedy. Most of the time, I will hold on to my contracts as long as I could with expectation that the price would keep getting better. Either I was too bullish or too greedy, holding onto a contract for a long period of time has certainly taught me some valuable lessons.

I have kept Wheat Dec 15 contract from the very first day I started trading. The price has been going up and down since then. At the end of last week, the price hit $5.22 per bushel in the midst of dryness concern. The market opens this week with price of wheat tumbles down to $5.06 per bushel, as a result of wetter weather in some US area that helps the growth of the crop. USDA has just released this week’s crop progress report this evening. The report shows 88% of the wheat crop has been planted, and 72% of the crop has emerged. These numbers are 5% and 10% respectively higher than last week’s rates, which will mean price of wheat could drop further the next day.

Another argument to this price drop is based on technical reason. Austin Damiani, commodities broker at Frontier Futures, observed that this downward price movement is a market reaction to pull back from the resistance level at $5.24/bushel which is where the last week’s price was closely hovering at (CNBC).

So far, I have mostly used fundamental analysis for my strategy in trading wheat and other commodities. Another type of strategies that traders also use besides looking at weather forecast and crop reports (fundamental analysis), is technical analysis. The two commonly used tools in technical analysis are resistance and support levels.

According to Barchart.com, wheat’s first and second resistance levels are at $5.18 and $5.24 per bushel respectively. This means that price of wheat when it reaches these two levels, it will have the tendency to fall. On the other hand, support level indicates the lowest price level a commodity can reach and the point where the price will eventually move up.

My portfolio value has somewhat improved a little bit this week as a result of diversification. I took a short position on soybean flour and long position on cacao. Both of these contracts have gained 1.01% and 0.46% profit since my purchase. I also bought two more contracts of sugar as price of sugar continues to rise due to unfavourable rainy condition in Brazil that threaten the harvest prospect. On the contrary the rain helps boost the sowing of soybean and harvest yields of coffee. As rain is expected throughout this week in Brazil, my speculation is that price of coffee and soybean will continue to drop, while price of sugar will hopefully continue to increase.

 

To better predict the movement of price in the future, I will use a combination of fundamental and technical analysis. Fundamental analysis will help me to see which direction the price of a commodity will go, whereas technical analysis will hopefully serve as a signal of when to exit or enter a trade.

Until then, happy trading!

O

The fourth week had seen my portfolio value crashed as I had maintained my bullish attitude towards wheat, corn, and coffee, which had seen their prices dropping this past week. Fortunately, my sugar contract is gaining profit so far as the price continues to climb.

Rain has improved the harvest prospect of coffee in Brazil’s top Arabica producing state. The market trend for coffee has been bearish over a week, and it seems the trend will continue.

 

 

 

 

 

 

 

 

 

The price of wheat had been dropping last week due to the rain forecasted in the producing area. But the market sentiment is expected to be bullish as concern over dryness emerges again in southern Russia and in Europe. Low temperature and dryness has been threatening the sowing of the winter wheat and also the emergence of planted wheat crop in Russia due to shortage of water supply. I will maintain my long position this week as price is speculated to trend upward as November comes.

The recent revival of US dollar has also moves the price of corn as US export sales has weakened. Also, according to USDA data, US export for corn for 2015/2016 is expected to be 35% lower than last year. Although the market trend for corn currently is spotted by Barchart to be bearish, I will maintain my long position as the strength of the trend is reported to be weak.

Sugar has been my saving grace this past week. Price is moving upward since last week. Barchart also observes the market trend for sugar is “buy” at the current time, and the strength of the trend is strong. Recently sugar production has faced a negative supply shock.  Agrimoney reports that extra production of sugar cane in Brazil is used for ethanol production to meet biofuel demand. Moreover, El Nino is threatening production in Thailand.

For next week, I will probably try to do some day tradings to reap quick profits to increase my portfolio value.

Until then, happy trading!

O

 

 

Coffee prices have dropped to 125.85 cents a pound, after enjoying high performance in the past weeks due to drought concern. The dry weather that Brazil experienced recently has threatened the flowering process of the crop.Three drivers have been identified to drive the price downward. The first driver is the weather outlook in Brazil. Rain is forecasted for Brazil’s coffee growing state, triggering many traders to take a short position. Secondly, the depreciation of Brazil Real towards US dollars gives a greater incentive to the exporters. A weak currency could mean cheaper production as a result of a value decrease of non-tradeable goods (e.g. wages). Lastly, the news about Columbia lowering the quality standard of exported coffee is another potential positive supply shock that will cause price to collapse. However, some forecasters are predicting that dry condition will persist in Brazil. I will hold my coffee for a few days before changing my position to short.

The price of wheat and corn also drop because of the expected rainfall in some production states in US that will help to boost output volumes. As a result of the falling price of these two commodities, my portfolio value has suffered significant decrease of 0.14%.

Price of sugar has seen small increase in the past week. But with news of India, the second biggest producer, are encouraging sugar mills to step up their export output, price is speculated to drop. I will be changing my position to short in the coming days.

O

 

The second week had been a good week for coffee. Throughout last week, price of coffee continues to rise. Brazil and other South American coffee producing countries have been experiencing unusually persistent dry and hot weather, which are not conducive for coffee plantation. The weather concern is most likely the main driver of the surge in price. Analysts also viewed that coffee producers have been reluctant about increasing level of production at the current coffee price level. The producers want the price to surge to profitable level as the current price level is discouraging extra production.

The 5% gain in my portfolio value in this second week is largely attributed by the strong performance of coffee in future market. Wheat price has been eclipsing around $5.12 per bushel level. The price of wheat seems to fluctuate up and down around that price level. I wouldn’t expect any drastic movement in the week ahead. I also made a good decision last week to short my cotton. From this transaction, I gained profit of $620. Price of cotton has been going up and down since then with many speculations on downward trend in price movement as severe weather in several places in US has damaged the crop.

Based on my observation towards soybean price that have upward trend, I expect price of corn to be moving at the same trend as both goods are substitutes. However, corn has not moved as I speculated it to be, the price hasn’t increased much since then. I also took a long position on sugar, as USDA reported that Brazilian sugar exports currently to hit the lowest in seven years.

So far it’s been a good week for my portfolio, thanks to coffee!

Until then, happy trading and enjoy your coffee!

O

In my first week of trading, I took a rather careful move, since I want to get a flavor on how commodity futures work. Based on my own instincts, historical data on past performances, and reading some analysts’ speculations online, I decided to go long on four commodities’ future contracts (1 wheat, 1 cotton, 1 coffee, and 1 cheese). As of last week’s market closing day, my portfolio value goes up by 0.36% in overall. This small increase is contributed by slight increase in wheat’s and coffee’s price. Unfortunately, I am not so lucky with the price of cotton and cheese, which are valued less than my initial purchase price.

Wheat

Last Thursday (Sept 30th), I took a long position on a December 15 wheat future contract when the market price was at $5.12 per bushel. USDA had released the data for US’s crop stocks and production for grains recently. The data reported a lower forecast for this year’s domestic wheat harvest than what USDA had previously forecasted in the last report. For soft red winter wheat, production is estimated to be lower by 30 million bushels, which has seen its output level down 21% from previous year (Agrimoney).  Also, the dry weather condition affecting Australia and Russia, have put a downward pressure on wheat harvest . My speculation that price of wheat would go up was proven to be right. The newly released information from USDA and weather concern bumped up the price of wheat on Thursday and early Friday.

However, the price slightly fell down close to $5.13 per bushel before the market closed for that week. On Friday, Statistics Canada increased their forecast on wheat harvest (Agrimoney). Canada might have a better outlook on their harvest, as the weather across the Prairies is improving compared to the dry weather they had this summer that affected the level of output.  This will boost the wheat’s global stock level and help offset the poor harvest prospect in Australia and Russia. Keeping this in mind, I will probably take a short position on my wheat future contracts next week before price dips too low to the level where I will not gain profit.

Coffee

As for coffee, I took a long position on a basis that many analysts like Rabobank, a Dutch multinational bank,  is speculating price to move up, because of negative supply shock from dry weather (El Nino) implicating the coffee production in large producing countries like Colombia and Indonesia (Agrimoney). The market price of future contract for Dec 15 coffee has gone up by 1.47% since my purchase at $1.22.

Cotton & Cheese

I think it is perfect timing to end my blog entry this week by admitting I probably have made a bad decision to buy cotton and cheese in the first place. When you make a decision especially when it’s for investment including your assets and money, you need to do your homework. You need to research. Sometimes, your instinct may help with investment decision, but I don’t think it works for me this time with these two commodities. I should have probably taken a short position.

ANZ (Australia and New Zealand Bank) labeled the cotton futures market as “overbought” and speculates that the coming period will see a weak season for cotton price (Agrimoney). This argument is supported by the fact that USDA’s overestimate report last month on cotton’s forecast output didn’t do much on the price’s movement, which triggers analysts to question the purchasing power of buyers (Agrimoney). I also didn’t take into consideration that China as the largest importer of cotton has been cutting down their import. China’s 2015-16 imports is forecasted to reach the lowest level since 2002, a drop by 31% from previous year (Agrimoney). Another factor that contributes to a lower demand for cotton may be the competition cotton faces from cheaper substitute like synthetic fibres (Agrimoney).

The market price of cotton and cheese has dropped by 0.49% and 0.65% since my purchase. For next week trading strategy, I will try to diversify my portfolio a bit, by taking some short and long positions. I will probably offset one or two of my future contracts. Hopefully I will do better next week.

Until then, happy trading!

O

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