The Weekly Call – Trade Setups for the Week of September 3rd

The Weekly Call – Trade Setups for the Week of September 3rd

The Weekly Call provides perspective on high quality setups and trading strategies for the coming week. The purpose of this blog is to demonstrate how to swing trade futures using our methodology to select high quality setups and manage the trade with our risk management approach. This week we manage our trades in Corn, Soy, Wheat, and Live Cattle

Our goal in this blog is to generate a 200% return in less than a year by swing trading futures. All trades posted here are discussed in detail on our Daily Update subscription service. Our track record is now posted below under Completed Trades. See some of our completed trade videos below.

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Corn – Managing the Entry

Corn has already broken out and we have been waiting on the back test and a reversal pattern for the next impulse. The problem with breakout trades is the back tests are always bigger than you expect. We entered on 7-17 at $379 with at 1/2 size. If we see a lower low to $370 we will add. If this breaks down we have support at 364 so a decent risk reward ratio given we are expecting new highs in the coming months. We will be adding to this entry later by increasing size, even if we don’t see a lower low.

7-23 – We exited 1/3 of a position in profit at $386 and are currently waiting to see if the trend line breaks down. If so we plan to exit this trade. Corn has an alternate which is a full retest at $360. If seen we are buyers. I’ll be tweeting out the exit on Monday if the breakdown begins. If support holds here, I am expecting a new swing high in Corn.

7-30 – We were stopped out at even and exited the corn trade with 1/3 in profit. I plan to re-enter lower in the $360-364 area. This is a volatile time of year in grains and more volatility is expected. I am waiting on the next reversal pattern to get long again.

8-6 – Almost there, now trading December and waiting on a the setup. Nice positive D here. Lower low to $370 would work. I need to see a reversal pattern this week.

8-13 – Corn hit target last week and I entered with 1/2 size per the post on our private twitter feed. There is no reversal pattern yet and this could be a wave 3. Waves 4 and 5 if seen, I will add another 1/2 size or will add on the higher low. I am using 1/2 size here to manage risk.

8-20 – As mentioned last week, our initial 1/2 size entry was at the wave 3 low. We have completed the wave 4 and now finishing wave 5. I am expecting to add the other 1/2 size this week when we see a reversal pattern.

8-27 – I am still long Corn as the divergence is still holding. This style of entering a swing is call managing risk through size, so my discipline is to not add to my trade until I can confirm a turn. Only 1/2 size on and waiting for a reversal pattern to add. If divergence breaks, the trade is broken I will exit on the backtest.

9-3 – Last week Corn broke divergence and I planned an exits near the weekly pivot and upper channel trend line. I waited for the bounce and exited the position with a small loss. When I am legging into a trade with small size, I do not add until I see a reversal pattern. This prevents me from adding size too soon. It also helps with a trade is broken as it minimizes the loss. The trade broke, I exited on the bounce. I am not expecting a lower low. Let’s see what the next setup lower looks like.

 

Soy – Entering a Breakout

Soy is another commodity where end of quarter money was put to work. I have been waiting patiently for the back test to enter the trade. I plan to enter on the next lower low. Soy has been in a multi-year triangle and our original target was $900 on the weekly chart. We came very close to that low before the turn occurred. At this point, the back test is almost complete and we are waiting on the 50% retracement at 979 with positive divergence on RSI. Watch for our entry on twitter.

7-30 – I am waiting patently on the setup in Soy. When entering a breakout trade it is often difficult to wait for the consolidation period to end. See Wheat below as a good illustration of what happens when you don’t wait for a strong setup! At this point, cycles say lower prices are expected so I will wait for $979 and a reversal pattern.

8-6 – Currently appears that Soy is finishing a flag for a smallish wave 4. Looking for the last legg lower into 950. Nice positive d is expected to hold on the next decline. Cycles say a turn this week.

8-13 – I entered Soy last week at the end of the trend day lower and we have hit target at 950 and then some. As mentioned on our private twitter feed, this may be a wave 3 so we entered 1/2 size to reduce risk. We are now seeing wave 5 play out with divergence on RSI. Waiting on the reversal pattern to add the other 1/2 size. Bigger picture we have a large multi-year triangle and and expecting a big rally into next year.

8-20 – Soy appears to have turned and I am waiting on the larger reversal pattern to add the remaining 1/2 size to my position. Expecting to find resistance at $956 and looking to add the remaining 1/2 size to the back test from there.

8-27 – Soy is in a back test and I am looking for support at $930. If seen this is the area I would like to add my other 1/2 size. Again, this type of entry I am using 1/2 size to manage risk and then adding to the position only when there is a clear reversal. Expecting a turn this week. Break the current low and this trade is invalidated.

9-3 – Soy found support at $930 and has bounced nicely. We are past the 50% back area and I will be taking 1/3 off on Tuesday and setting my stop to even. Will be posting my entry on the Art of Chart private twitter feed and discussing the exit on the Daily Update.

Wheat – Entering a Breakout

Wheat has seen quarter end money flow into it like corn. This is the time of year for grains to be at their lowest prices as farmers begin a new agricultural year. There is a lot of volatility with sales, new hedges, etc coming into the market. I am expecting Wheat to find it’s footing here and I am expecting a rally into October. I entered long last week per the private twitter post at 501 and am holding the trade until either divergence breaks or the support trend line breaks. On a break of the trend line, I will be watching the Monthly S1 pivot for support.

7-30 – My entire position has been stopped out last week at 482 and I am now waiting for a lower low and a reversal pattern to re-enter. As mentioned, the consolidation pattern after a breakout is often difficult to find the right entry without adding risk to your portfolio. I am managing this portfolio with the idea of limiting my maximum draw down to not more than $3200. In this case, I was looking for both the monthly pivot and the .618 retracement for support and both failed. I will wait patently for the next setup depicted below and I will likely be long again later this week or next.

8-6 – At this point, I am waiting on a reversal pattern. Nice positive D here on Wheat, the formation needs a lower low just to 52s or 46s before we see a turn. There is risk to 439’2 and the monthly S1 pivot. Being patient here and waiting on the setup, I expect an entry this week.

8-13 – As per Corn and Soy, I entered another 1/2 size last week in Wheat. Nice trend day and likely end of wave 3, if 4 and 5 are seen then I will add remaining size after the reversal pattern is formed. I normally do not trade both Corn and Wheat as it is basically the same trade. So technically I already have a full position at risk. With this being the case, any adds will be done after reversal patterns are well defined.

8-20 – As mentioned last week, our initial 1/2 size entry was at the wave 3 low. We have completed the wave 4 and now finishing wave 5. I am expecting to add the other 1/2 size this week when we see a reversal pattern.

8-27 – A potential reversal pattern is forming, looks like a possible IHS. Once it completes, I am expecting weekly pivot to convert and I will then add the remaining 1/2 size to the trade. So far so good, waiting for price confirmation of a turn.

9-3 – Wheat has rallies from the potential reversal pattern and I am expecting a retest. Any break of $426’2 and likely we see new lows and I plan to exit this trade if seen. We are in a small flag here to we need to be aware of the retest, support found above $426’2 will cause price to challen the monthly pivot next at $454.

Live Cattle – Entering the Trade

Live Cattle is an old friend and it’s time to consider a long. A nice three wave move into the low window and also 50% back of the whole formation. I am 1/2 size long here per my post on our private twitter feed and looking for a reversal pattern. Expecting a turn this week as we are well into the timing window.

8-20 – First 1/2 size long was a little early, likely the low in RSI is a sign of wave 3 completion. We are now in wave 5 and expecting a turn between here and 102.625. I will add the remaining 1/2 size to this position when a reversal pattern is seen.

8-27 – Still waiting in the next 1/2 size add and looking at the next low cycle around Sept 11 or so. Trade has risk to 102.625. Once we have a reversal pattern I will add the remaining 1/2 size to the position. This style of entry is different than the others that we have done with other trades. It depends on the instrument and your personal trading style. Waiting for price confirmation is often best and with certain commodities, having your small toe in the water as a starter works too, as long as you do not add on the way down, which is how many traders create trouble for themselves. I am happy to wait on the next low window and see.

9-3 – Still waiting on the reversal pattern and also waiting on 102.625 which is the risk on this trade. I will wait patiently as we are now in the low window and looking for a turn. I will add 1/2 size when the reversal pattern forms.

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Have a GREAT trading week!!!

COMPLETED TRADES

Track Record of Completed Trades

The purpose of this blog is to demonstrate how to swing trade futures using our methodology to select high quality setups and manage the trade with our risk management approach. This track record is based on entries and exits as posted in this blog using a $50,000 account limited to a three contract position size. We will increase position size after we generate a 200% return. See the videos below for more information.

 

Completed trade in Cattle as of November 28th

We expect subscribers to have captured 60% of the swing in Live Cattle which is over $14,500 in profit using a margin of only $5,115. A great example of using leverage in futures.

Completed Trade in Coffee as of December 12th

The total swing was $37.00 and we expect subscribers to have captured 60% of a wing or $22 in Coffee for a profit of over $25,500 using a margin of $8,850. A great example of using leverage in futures. See the video below for the review of the trade.

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Completed Trade in Natural Gas as of January 2nd

We were stopped out of out last 1/3 position as weather related news created a gap down on January 2nd and a possible flat with support at 3.196. This concludes our trade with Natural Gas, we exit with 550 ticks on 2/3s of a position with $8,500 in profit.

Completed Trade in Coffee as of January 19th

We exited the Coffee trade on January 19th with $17 or over $15,000 in profit using a margin of $8,850. A great example of using leverage in futures.

Completed Trade in Gold as of February 8th

We exited the Gold trade on February 8th with over $14,000 in profit. We entered on January 3rd and held the trade into the high window. We will re-enter Gold in a few weeks after a back test.

 

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About the Author

Stan Nabozny
Stan is a 20 year retail trading veteran and Co-Founder of The Art of Chart. His specialties include using futures and options to trade Commodities, Equities, Currencies, Precious Metals and Bonds. Stan believes that Risk Management and Trader Psychology are more important that technical analysis and spends his time teaching and coaching other traders on these topics . Stan uses various trading systems and technical analysis approaches that integrate time and price in his work. See his latest articles here and www.huffingtonpost.com.

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