Saturday, 15 August 2009
This is our first post on TraderPlanet. It comes from Thursday evening as we
were unable to get set up to before this morning. The post is not hindsight, for
it went out to our subscribers as a sell rcommendation. It is being added to give
readers an idea of how we interpret markets…based on present tense market
activity, and that is how we word our posts, in the language of market behavior.
For us, the most reliable source of information comes from the market, the
distillation of all input, from the most informed to the least informed traders.
Thursday Evening 13 August 2009,
Nov Beans Could Drop Two Dollars From Today’s High
We know beans about crops, acreage, yields, planting times, etc, but we do know
charts, and there is a good possibility that Nov Beans could go down to $8.60. We
took a look at monthly chart and saw that July was a wide range that opened near
the high, 1256, the low was 973, and the close was a little better than mid-range
at 1134. This wide range bar and mid-range close tells us that beans are likely to
trade in a range for the next few months. $8.60 is outside of the suggested
range.
On a weekly chart, the high for the month of June occurred on increased volume
with a close that was under mid-range for that week. This tells us that sellers were keeping a lid on price, preventing the range from extending higher, and the close
under the mid-point for the week lets us know that sellers were strong enough to
push buyers back, otherwise, the close would have been higher. The month of
June’s closing price was 12.43.
The opening for the month of July gapped down to 12.20, which was also the high
of the month. Yesterday’s high finally got back to the July high level, but the last
two week’s results, price-wise, did not match the volume effort. In other words,
volume was good, but the ranges were realtively smaller and did not reflect the
energy [volume] behind the effort. This was a caveat of which to be aware going
into today’s post crop report trading.
For the month of August, there was a trading range for the first seven days of
trade. Volume was low for last Thursday and Friday, the lowest of the seven days,
while prices closed about mid-range. As an aside, the purpose of mentioning
where the close is on a bar is because the location of the close reveals who won
the “battle” for the day, demand or supply. The two days’ low volume and so-so
closes told us that there was little demand at an area where demand ought to be
asserting itself but was not.
The Tuesday and Wednesday trading ranges were wide and the closes at the high
end, without breaking upside and out of the trading range. This suggested that
buying was spent, unable to push higher. Then there was today. Price opened
higher, rallied to the 10.60 level and never looked back, or better said, never
looked up, again. The drop was uniformly down with little respite. There were no
rallies to sell for a good position. You either closed your eyes and jumped in, or
you just watched and waited.
Once price dropped below 10.50, we watched and waited for a rally to sell. That did not happen. Finally, we just went short at market, $10.33, around 12:30 p.m. CST,
figuring weak rallies should equal lower prices,or buyers would come in and rally
beans back to some higher level. Nov Beans closed at 10.18+, so we have an
edge, for now.
We knew yesterday that if beans were to reach our target of $8.60, they had to
start droping right there and right now. The higher opening did not look good, for
a little bit, and we figured that was providing more profit opportunity to get to
$8.60, [tongue on cheek]. Once price dropped to 10.50, we knew beans had the
potential for a turnaround.
The non-stop decline was a little harder to deal with because it represented a
change in price behavior in that there were no rallies to sell. In a single trading
day, November Beans just about erased eight days of trading effort, another
change of behavior that supports a change in price direction from up to down.
Today marked a turning point for November Beans.
We are using an initial stop of 10.66, the year of the Battle of Hastings when
William and the Normans conquered England. Why be ordinary? The stop will be
adjusted as price develops, and if our scenario is on target, we will be adding to
shorts on the way down, if and as price activity allows.
We keep our subscribers updated with developments and recommendations at
http://www.edgetraderplus.com/
—
You can see from the chart below, we covered half positions at 989, a money
mangement decision we use to lock in profits as the market moves in the
intended direction. At the time, Nov Beans had stopped declining and were
hovering around 985 for some time. Given the severity of the drop and the lower
volume activity, Beans could have a spike recovery rally at any time. Taking
profits on half the position assures certainty of that portion of the trade.
Subsequently, Beans declined to new lows, and that is where we are, for now,
New short positions may be added on weak rallies, but that is an unknown until
it happens. We make no predictions about what a market may or may not do.
We follow price activity as it develops.
