This week’s focus will be on technical analysis. I am still learning about it and it’s interesting to see some patterns on the charts. Like Andrew said in his workshop, the fundamental side of analysis usually confirms the patterns and trend identified with the technical analysis. For example, for the December wheat 2012 in the recent while, there’s inverse head and shoulder (if I am not mistaken) prior to last week’s 4 days rally.
Head and Shoulder (W2Z)
Source: CME Group
Along with identifying the patterns and trend from the price movement, the trend in volumes is also an indication / confirmation of how strong a price trend is and how likely it will continue to be or come to a reversal. For example, “ff volume is starting to decrease in an uptrend, it is usually a sign that the upward run is about to end”[1].
I will continue to gather information from daily news to form my fundamental analysis when I jump into this technical analysis fest. At this point, I anticipate the followings:
- Soybeans: Prices would rise in a day or so as traders start to lock in their profits gained on last Friday’s plunge.
- Wheat: Prices would go down for a day or so and go up again ( a technical analysis based on the observation of the downward price and upward volume).
Downward price and Upward volume (W2Z)
Source: CME Group
- Corn: Its prices haven’t changed much recently. More investigation is needed.
Cheers.
1. Janssen, Cory, Langager, Chad and Murphy, Casey. (n.d.). Technical Analysis: the importance of volume. Investopia. Retrieved from http://www.investopedia.com/university/technical/techanalysis5.asp#axzz2By6bPZeP
For the rest of the weeks, we will be shifting focus to technical analysis. The following 2 websites should be helpful for that.
- Investopia (http://www.investopedia.com/university/technical): Andrew’s workshop on Technical analysis on the past Wednesday was enlightening. I seem to remember most of the names of the patterns, but not exactly how to make use of them. I found this site that offers a tutorial on technical analysis. As you go through the tutorial, you will get to learn about the philosophy behind Technical analysis, comparison between fundamental and technical analysis, price support and resistance, importance of volume and the price movement patterns, etc.
- TradingCharts (http://futures.tradingcharts.com/): The charts here are rather interactive, you can click on the candlestick or the bar, etc of each day and the overview (volume., open interest, high price, low price, etc) of each trade day will be displayed. The charts also show the MADC (moving average divergence convergence) , RSI (Relative Strength Index), and Volume for further technical analysis. What’s more, it actually provides daily analysis (implications drawn from each indicator) underneath the charts. It’s good to learn from other’s analysis, learning from examples. However, down the road, it’s important to do our own analysis instead of relying on others’ despite the convenience (there’s not too much explanation anyways, more on conclusions).
Happy trading with Technical Analysis or the combination of both Technical and fundamental analysis.
Cheers!
This week I came across 2 cool websites that focus on trading, provide knowledge and different tools for trading.
- Commodityhq.com (http://commodityhq.com): It has in depth analysis in the worldwide commodity industry (eg. American commodity industry, Canadian commodity industry,etc.); is has commodities database divided into different sectors (e.g. Agricultural) providing ways to invest in the commodity futures markets with news, articles and analyses. It also provides extensive knowledge about the trading platforms and trading in futures. Lastly, it has up-to-date heatmap keeping track of the movements of the commodity markets. (i.e. price changes in percentage per week, month, etc).
- Barchart.com (http://www.barchart.com/): This site has a lot to offer to help you get an extensive look into the trading markets. It has an auto-refresh screen to display the prices of the markets. What’s more, it aggregates the commodities of the same category with their latest contracts listed. This saves you time in browsing around for their prices. On the other hand, you will be able to find a lot of commentators sharing their ideas and thoughts about the markets on a daily basis. Their commentaries are useful for forming trading strategies.
Source: Barchart.com
Cheers.
There are 2 major things that should most likely to make a notable impact on the futures market this week. First, Tuesday, Nov 6 is the US presidential election day. Second, USDA will be releasing their monthly crop estimation on Friday Nov 9.
Some commentary mentioned that if Romney won the election, he would end the ethanol mandate put in place by Obama which would affect the ethanol price, as a result, hit the corn market as well[1]. Under the ethanol mandate, about 15 percent of global corn production is converted into ethanol for fuel use[2]. This has largely driven up the corn prices. Therefore, if the ethanol mandate would be lifted off by any chance (if Romney got elected), we should anticipate the corn prices to fall.
On the other hand, analysts suggested that the US 2012 soybean and corn harvests were larger than what the USDA projected in October[3]. Therefore, if the report corrected the estimation with higher crop production, the futures prices of corn and soybeans should go down for the day trade on Friday.
As for the wheat market, I anticipate it to be bullish under the tight supply and increasing demand in the world market.
Cheers.
1. Cummans, Jared. (2012, Oct 13). 4 Investing Opportunites From the Inside Commodities Conference. Retrieved from http://commodityhq.com/2012/4-investing-opportunites-from-the-inside-commodities-conference/
2. Carter, Coin. (2012). The Effect of the U.S. Ethanol Mandat on Corn Prices. Retrieved from google doc (for short).
3. Reuters Africa. (2012, Nov 2). GRAINS-Corn, soy fall on private US crop estimates, firm dollar. Retrieved from http://af.reuters.com/article/commoditiesNews/idAFL3E8M261J20121102
This week, I lost $9749.5 in offsetting 37 short corn contracts. On the other hand, I gained $1543 on buying and selling 2 wheat contracts. Here’s a recap and highlight of what happened.
Since I got myself into the situation of holding a large number of contracts again, I was looking for ways to offset them not only timely but also very carefully this time. At first, I tried to use Price Limit and Stop Loss orders to do that. However, the futures prices of corn didn’t change much on Monday and didn’t hit my price limit or stop loss price. Although, the prices of corn on Monday went down in my favor, I did anticipate that the prices would rise and rise quite rapidly in the next few days due to the damage done by the hurricane Sandy. When I was contemplating what to do, I got a message from Yijeong and she suggested that I could use Time Limit order to offset my short corn contracts at the open price (ie. setting the time: 9:30am) when I was still making profits. I did so. However, it turned out that when TradeSim processed more than 1 contract, there would be delay even though it’s a time limit order. The corn prices rose on Tuesday and my 37 short corn contracts were offset with a major loss.
37 shorts on C2Z: price in: 739.75, price out: 745.00 (this price was actually higher than the day’s highest price which is still puzzling me), realized loss: $9749.5
On Wednesday, I got up early and started to look at the news. It appeared to me that the wheat price would rise that day based on the following and news.
- The prices of wheat were rising shown on CME electronic trading page.
- Australian wheat export plunging[1]
- Australian wheat showing lower protein, and Asian importers might be seeking more North American wheat[2]
- Asian currencies are strengthening[3]
I went long on 2 wheat contracts, W2Z. The wheat futures prices went up on Wednesday, as well as Thursday. I placed a Price Limit order on Wednesday night to offset these contracts to lock in profits. Both contracts were offset on Thursday.
2 longs on W2Z: price in: 869.00, price out: 883.25, realized gain: $1543
Overall, I lost $8206.5. Although I lost much more than I gained. I think I have improved on strategies and analysis, so I am happy. =]
1. Javier, Luzi Ann and Sedgman, Phoebe. (2012, Oct 31). Australian Wheat Exports Plunging Most in Six Years: Commodities. Retrieved from http://www.bloomberg.com/news/2012-10-30/australian-wheat-exports-plunging-most-in-six-years-commodities.html
2. Packham, Colin and Naveen. (2012, Oct 31). Australia’s early wheat harvest shows lower protein. Retrieved from http://www.grainews.ca/news/australias-early-wheat-harvest-shows-lower-protein/1001809854/
3. Karunungan, Lilian and Teso,Yumi . (2012, Oct 31). Asian Currencies Rise for Fifth Month on Recovery Optimism .Retrieved from http://www.bloomberg.com/news/2012-10-31/asian-currencies-set-for-fifth-monthly-gain-on-recovery-optimism.html
Despite some technical difficulties, I had a good start in trading in the past week. I tried to play it safe and lock in small profits on each contract. I was able to do that by longing wheat and offsetting it in the middle of last week.
Last weekend, I expected the futures of wheat would rise at least for Monday due to the news of worries about Ukraine halting wheat export[1]. I already had a long contract on wheat (W3K) before that, so I placed a short, Price Limit order to offset it. I also placed a Stop Loss order to offset it and minimize the loss in case the otherwise happened.
W3K
- Long – Price-in: 889 , Close Price last Friday: 886.75
- Short- Price Limit placed over last weekend: 895
- Short- Stop Loss placed over last weekend: 880
I expected the price limit order would have been executed on Monday because the price of W3K went above my price limit (895) that day. For some reason, it wasn’t executed and I left my Price Limit and Stop Loss order in. The futures of wheat fell on Tuesday. At the end of Tuesday, there were news about wheat harvest falling in Australia[2] and declining wheat exports in Turkey[3] which, I anticipated, should stimulate a upward price on wheat futures on Wednesday. It did and my price limit to short W3K wheat was reached and executed. My price- out was 901.25 against price- in at 889 which resulted a profits of $611.50. I was happy.
I tried to get in the corn market in the latter of last week. I made an erroneous long, price limit order on corn (C2Z) where the number of contracts and price limit were misplaced/swapped into the boxes. I didn’t realized that until the order was processed and couldn’t be cancelled. Since the corn prices was falling at that point, I placed a short market order to offset them. At the end, TradeSim executed 74 longs and 37 shorts to offset the longs, leaving me 37 shorts on C2Z on the end of Friday. Offsetting these 37 short corn contracts are key which I would talk about in my road ahead.
1. Ingwersen, Julie and Nelso, Sam. Reuters. (2012, Oct 19). U.S. soybeans fall, wheat pares gains on macro worries. Retrieved from http://www.grainews.ca/news/u-s-soybeans-fall-wheat-pares-gains-on-macro-worries/1001782004/
2. Sedgman, Phoebe. (2012,Oct 23). Wheat Harvest in Australia Falling 28% to Five-Year Low. Retrieved from http://www.bloomberg.com/news/2012-10-22/wheat-harvest-in-australia-seen-slumping-to-lowest-in-five-years.html
3. Harte, Julia. (2012,Oct 23). Turkey’s Wheat Exports Decline Due To Climate Change, Says Industry Official. Retrieved from http://www.greenprophet.com/2012/10/turkeys-wheat-exports-decline-due-to-climate-change-says-industry-official/
This week I came across these two websites as I was trying to look for more authoritative opinions:
- US Wheat Associates (http://www.uswheat.org): I think this is a good place to acquire extensive knowledge about wheat as a commodity.
- It provides information like quality, cash prices at export locations, official reports about different classes of wheat (e.g. Hard Red Spring, Soft Red Winter, Durum); Although CBOT is trading Soft Red Winter wheat, it’s important to know about the movement of other classes wheat.
- It provides the schedule of important industrial meetings. We should expect some particular price movements over the days of meetings as a result from the topics and discussions in them.
- It also provides summaries and analysis on important news in their Media Center which give a good up-to-date overview on the current wheat market.
- National Corn Growers Association (http://www.ncga.com): This is for corn and all about corn; its usage is similar to the above. Besides, it has a section that covers different topics relevant to the corn market, such as Livestock, Ethanol, Farm Policy, etc.
If you are reading this, I hope this sources would be helpful for you too.
Cheers.
We were talking about sustainability in FRE 515 this week. During the class, maybe one of our classmates raised concerns and questions about managing the study load and pressure during the crunch time with exams and ongoing course work. Professor Ron mentioned about prioritizing which is a key in time management. Priorities change as things come up and down. For example, these few weeks, exam and presentation matters have come to the top of priorities, so the majority of my time, thoughts and emotions have been on them as well. Another comment made by classmate Gabi during the class discussion has also stuck in my head, which is lack of sleep for consecutive days or a longer time period is not sustainable for a person. Arise from the above comments, I want to be honest about the following:
- I haven’t been able to keep an eye on the commodity market these days; I haven’t been up to date with the relevant daily news which creates difficulty for myself to make decisions in trading.
- I realized that I was unfocused and careless after I found out a few mistakes I made in the trading this week; One of them was a major mistake and it created a very panicky day for me.
- My Existing Shorts: Price-in: 739.75, Current Price: 737.75 (gaining $100 on each contract)
- My Pending Longs to offset the above: Price Limit: 735 , Stop Loss: 740
- The crude futures went back up last Friday before the market closed after a two-week fall. I anticipate some rise on corn and soybeans on Monday attributed to the spillover effect from the crude futures[1].
- Asian currencies are strengthening[2] which would likely to stimulate more imports to the region.
- Good harvest news on corn and soybeans in Canada[3]
- Hurricane Sandy is coming to hit the northeast US (the graph below shows its strength and path). Although it’s a Category 1 hurricane it’s predicted to become a worst hit to the area in 100 years[1]. The fear and the damage from this Hurricane would probably drive the prices up on Monday. (drive up the cash prices, the basis, and the futures prices)
Hurricane Sandy Oct 28, 2012
Source: wunderground.com[4]
I will keep an eye on the daily News to correct or help further predictions over the week.
1. Shenk, Mark and Zhou, Moming. (2012, Oct 26). Crude Pares Second Weekly Loss as Hurricane Approaches. Retrieved from http://www.bloomberg.com/news/2012-10-26/oil-fluctuates-as-u-s-economy-grows-more-than-forecast.html
2. Teso,Yumi. (2012, Oct 26). Asian Currencies Strengthen in Week on Signs of China Recovery.Retrieved from http://www.bloomberg.com/news/2012-10-26/asian-currencies-strengthen-in-week-on-signs-of-china-recovery.html
3. Shiells, Terryn . Service Canada. (2012, Oct 26).Ontario soybean/corn crops yielding better than expected. Retrieved from http://www.grainews.ca/news/ontario-soybean-corn-crops-yielding-better-than-expected/1001799451/
4. woundergroud.com. (2012, Oct 28). Hurricane Sandy. Retrieved from http://www.wunderground.com/tropical/tracking/at201218_5day.html?MR=1
My account got reset on Monday with initial balance as $40,000. I did some trading this week on wheat on Wednesday but I encountered various technical issues:
- TradeSim threw some errors when I tried to submit an order; I should have taken screenshots of those error messages. I will do that when I run into the problems again.
- The contracts I want weren’t available during some time period when the market was open. As a result, i could’t offset my contract to lock in profits.
In all, I didn’t do much partly due to the aforementioned issues. Therefore, I am taking a break from writing the formal blogs this week. I will resume on regular blogging next week. Cheers.
There are 2 websites I would like to suggest:
- Equity Clock website: it has information related to the stock markets. It has daily news update of US economic events. It also has commodity futures seasonality charts (representing the past 20 years till 2009) http://www.equityclock.com/charts/ Although it is not the same every year, it is probably beneficial to learn about the general movement of the futures prices in the past.
- Investopedia: It’s a good place to go when you are not too sure about some terms related to trading and you want some quick help, http://www.investopedia.com. For example, when I read the news articles, I encountered the term “backwardation”. It’s taught in the class but I wasn’t too sure about it. It’s available here with examples: http://www.investopedia.com/articles/07/contango_backwardation.asp , so it’s pretty handy for a quick look up.
Cheers!
