Commodity Advisory Newsletter April 14th

Commodity Advisory Newsletter April 14th

Several commodity markets are poised for well-defined up-trends this year. I plan to write about these markets on a bi-weekly basis as the views presented here are more thematic and longer term in nature. Updates to the trading strategies published here will be provided on an ongoing basis.

In this issue, I will be focusing on updates to my Cocoa and Lean Hogs forecasts. Please see the past issues of the Commodity Advisory Newsletter for more information on these positions.

 

Lean Hogs

Since the Commodity Newsletter published on 2-24, Lean Hogs has gained 45%. The Lean Hog crisis in China has escalated by spreading into Mongolia and 21 provinces in Vietnam. Mongolia  has exterminated 10% of their Hog population. There are longer term implications in China and their Hog stock. This will take years to repair.

The African Swine Fever is now being called the Asian Swine Fever. In late March, the pig herds in China have dropped 16% from the previous year and the damage is not yet complete. Conservatively, we can estimate that China’s production will likely drop between 15-30% and they will be actively importing pork for the next year. Getting the trade deal done will likely boost US exports. Even before the trade deal, China is now buying Pork in record quantities. Last week’s USDA export sales showed China purchased 80% of our pork exports, despite the heavy 60+% tariff. Trump says there may be a tariff deal in the coming weeks. When this occurs, I expect the tariff to drop and the imports to climb to record numbers. Will this be a sell the news type event?

This week’s daily chart shows the big move from the X wave reversal in late February. We are in a 5th wave here and there is already negative divergence on the Daily chart. I am still expecting 105 as a target for this move, we may see it this week. We are approaching a possible turn date and also a seasonal high date. I am providing this update as those in this trade should mind their risk as a decline on a major news announcement is possible. I am long and carrying a trailer in the August contract and last week I started a longer dated position in the February contract. Both positions are in profit with stops at entry. This is not a market I would short but mind your risk and capture profits into the 105 area near term.

 

Cocoa

Since the Commodity Newsletter published on 3-10, Cocoa had gained 14%. The Ivory Coast is the main producing area for Cocoa in the world and record production is not going to happen this year which is what was forecasted. Soil moisture and rainfalls are forecast to drop. The governments along the Ivory Coast are also allowing cocoa trees to be cut down in protected areas so the record high production forecast of 4.799 million tonnes is not going to be made in 2019. Prices should continue to climb. I am still expecting a higher high in the 2550 area into the early May time frame.

On the four hour chart, we have had ten straight days of upside followed by a consolidation pattern which should lead us higher into target by early May. Cocoa can be volatile and is a news driven instrument so leave room for a stop at the declining resistance trend line. If you are in the trade you should be out 2/3s in profit and have a reasonable stop below.

 

Wrap Up

The trading strategy review below has a summary of trades I have entered which is also  posted on our private twitter feed and The Weekly Call which can be found HERE. 

I will continue to cover thematic trades in the commodity world in this newsletter and will continue to update the trading strategies below.  My next newsletter will be next week and will likely focus on the Soybean complex. Until then, Trade Smart and Trade Safe.

Trading Strategy Review

The trading strategies below represent positions taken by this newsletter and shorter term positions covered by The Weekly Call. See the Weekly Call for the latest updates to these positions.

Disclaimer: Trading futures contracts and commodity options involves substantial risk of loss, and may not be appropriate for all investors. By reading this report, you acknowledge and accept that all trading decisions are your sole responsibility. Trading strategies referenced in this document are only suggestions, no representation is being made that they will achieve profits or losses. Past performance is no guarantee of future results.

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 Energies, Precious Metals, Equities, Currencies, Bonds, Softs, Grains and other commodities. 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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