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.
A quick update on my existing trading strategies which can be reviewed below…….. I am still holding Corn and Coffee long and also holding short futures on Live Cattle. I have initiated a new Gold trade which can be seen below in the summary. I am looking to re-enter Lean Hogs long. Please see the past issues of the Commodity Advisory Newsletter for more information on these positions.
Cocoa
Record high production was forecast last week which caused a small down turn in Cocoa and a buying opportunity. The Ivory Coast is the main producing area for Cocoa in the world and record production is not going to happen this year as 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 likely not going to be made in 2019. Cocoa appears to be undervalued at current levels and could see an extended move to the upside in the near future. The Commitment of Trader report for March 5th has managed money traders adding 13,275 contracts to their already short position which is fuel for a short covering rally.The jump in open interest last week indicates that the short side is being pressed by fund traders. A break above 2270 should spark a short covering rally.
On the daily chart, cycles are pointing higher into the end of the year. We have a seasonal low in the June time frame which will likely be a retest. The latest pull back last week is an opportunity to buy. Convert the monthly pivot at 2257 and we see the 2450 area by mid April. RSI is compressing here which is an indication that we can see a trendy move.
On the four hour chart, we may have just finished wave x in a three back. A break of the red declining resistance trend line would be the first confirmation of a move higher into 2450 by mid April. Stochastic show an oversold condition and RSI may break the blue trend line which would be a signal for an upside move.
Trading Strategy
For this week I am looking for a possible entry using one of two strategies, A simple call spread in July, something like the 2300/2500 or I will just enter the May futures long in the 2200 area. I will risk 100 ticks from entry.
Wrap Up
For now, the Lean Hogs and Cocoa markets have my attention for new entries this week. Corn is very oversold here and is so is Wheat. My next newsletter is in two weeks. Trade Well and Trade Smart.
Trading Strategy Review
The trading strategies below represent positions taken by this newsletter and shorter term positions covered by The Weekly Call. Updates to this newsletter are provided bi-weekly.
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.
10th Mar 2019