Heating Oil Futures
Heating oil futures in the December contract settled last Friday in New York at 118.48 while currently trading at 116.85, down about 200 points for the week as prices are still stuck in a tight 7-week consolidation pattern looking to break out to the upside in my opinion.
I will recommend a bullish position if prices break the October 9th high of 121.44, which could happen next week as prices are trading right at their 20-day but still below their 100-day moving average, which stands at the critical 123 level.
The volatility in this commodity will start to explode to the upside as we start to enter the winter months as seasonably speaking. That’s when prices can have tremendous spikes to the upside due to frigid weather out in the eastern part of the United States. I think demand will also start to come back for this commodity, and if you look at most commodity sectors, they are rallying significantly. I do not have any energy recommendations at the current time, but it looks to me that heating oil has bottomed out as the risk/reward would be in your favor as this is a very large contract.
TREND: LOWER – MIXED
CHART STRUCTURE: EXCELLENT
Silver futures in the December contract are currently trading at 24.61 an ounce after settling last Friday in New York at 24.40, up slightly for the week experiencing high volatility as prices are looking to break out the upside in my opinion despite the recent pullback.
I will be recommending a bullish position if prices close above the 25.71 level while then placing the stop-loss under the Sep 24 low of 21.81 as an exit strategy as the risk would be around $4,000 per mini contract plus slippage and commission as this is a high-risk trade.
Silver prices are now trading above their 20 and 100-day moving average as this trend has turned to the upside as I think we could be involved soon, so keep a close eye on this market. I am also keeping a close eye on a possible bullish position in gold if prices close above the 1,939 level as the U.S presidential election is right around the bend. Once that situation is clarified, you will see massive volatility enter stocks and commodities. However, I think we might remain in a choppy trend until then.
CHART STRUCTURE: IMPROVING
Orange Juice Futures
Orange juice futures in the January contract settled last Friday at 114.50 while currently trading at 111.10, down over 300 points for the trading week as prices hit an 11-year low earlier in the week when prices traded down to the 107 level before rallying.
I’m sitting on the sidelines waiting for a bullish position because I think prices are in a bottoming out situation. I like the action that took place. Juice prices are trading below their 20 and 100-day moving average as this trend remains to the downside. If you take a look at the daily chart, the downtrend line remains intact. I’m not willing to take a position at this time as the risk/reward is not in your favor, so be patient as I still think that the 100 level will hold.
I have a coffee recommendation out of the soft commodity sector. I think cotton and sugar prices will continue to move higher as the agricultural markets except for coffee and orange juice have caught fire. Eventually, this commodity will start to expand to the upside, especially if weather conditions in the coming months ahead look adverse.
CHART STRUCTURE: POOR
Wheat futures in the December contract settled last Friday in Chicago at 6.25 while currently trading at 6.29 up about $0.04 for the trading week as prices are right at a new 5 year high.
I have been recommending a bullish position from the 5.40 level. If you took that trade, continue to place the stop loss on a hard basis only at 5.87 as an exit strategy. However, the chart structure will improve in 3 trading sessions; therefore, the monetary risk will be reduced.
Wheat prices are trading far above their 20 and 100-day moving average as this trend is strong. If you look at the daily chart, the uptrend line remains intact as the entire grain sector continues to move higher as I also have several other bullish recommendations. Fundamentally speaking, the USDA’s Ag Attaché has Ukrainian wheat production 8% below USDA’s official estimate at 24.972 MMT, respectively. The Ag Attaché also sees tighter carrying stocks, reducing Ukraine’s 2020/21 ending stocks to 905,000 MT.
Volatility will start to expand tremendously as we enter the winter season. I think there’s still a chance that prices could trade up to the $7 level, especially if weather conditions continue to experience an adverse situation, so stay long as a top has not been formed.
CHART STRUCTURE: IMPROVING
Sugar futures in the March contract settled last Friday in New York at 14.43 a pound while currently trading at 14.75, up about 30 points for the trading week, continuing its bullish momentum as this commodity remains in a strong trend to the upside.
Fundamentally speaking, over the past 5 weeks, concerns about future Brazil sugar output. Archer Consulting Sep 29 said that dry weather that sparked fires in Brazil’s sugarcane growing regions could curb Brazil’s 2020/21 sugar production by -2.8 MMT. Also, Maxar said that Brazil’s sugar-growing regions have only received 5%-25% of average rain in the past few months, leaving crops “extremely dry.” Sugar prices have support by concern a La Nina weather pattern could lead to prolonged excessive dryness in Brazil that cuts sugarcane yields.
As I have written about in previous blogs, I think there’s a possibility that prices could hit the 20 level, especially if weather conditions become more adverse, which could happen as I have seen this in the past as the volatility certainly will expand. If you are long a futures contract, I would place the stop loss under the 10-day low standing at 13.78 as an exit strategy as I see no reason to be short.
CHART STRUCTURE: POOR
Soybean futures in the November contract ended the week on a sour note, down 5 cents at 10.68 after settling last Friday in Chicago at 10.50 still up about $0.18 for the week as prices are right at a 2 ½ year high continuing its bullish momentum.
I have been recommending a bullish position over the last couple of months from the 9.14 level, and if you took that trade, continue to place the stop loss at 10.35 on a hard basis only. I’m not willing to risk more than that price level as the chart structure will improve daily next week, therefore lowering the risk.
The Midwest harvest is around 75% complete, which is ahead of the 5-year average. The main fundamental factor for higher prices is that China is purchasing large quantities of U.S. soybeans, which they committed to in the Phase 1 deal, which is a terrific thing for U.S farmers.
I also have bullish recommendations in wheat and soybean meal, which continue to hit new highs weekly. Corn prices also have entered into a long-term secular bullish trend, in my opinion, as the grain market remains strong, so stay long as I do not think a top has formed as the next major level of resistance is around the $11 area.
CHART STRUCTURE: POOR
Soybean Meal Futures
Soybean meal futures in the December contract settled last Friday in Chicago at 366 a ton while currently trading at 381 up another $15 as prices are right at a 2 1/2 year high.
Demand from China continues to push prices higher as this trend has been remarkable and very surprising over the last couple of months as I have been recommending a bullish position all the way back from the 299 level, and if you took that trade, continue to place the stop loss under the 10-day low at 352 on a hard basis only. The chart structure will start to improve tremendously in next week’s trade; therefore, the monetary risk will be reduced daily.
I still believe we could touch the 400 level as soybeans also continue their bullish momentum. I also recommend commodity and wheat as the whole grain market continues to march higher daily. Prices are trading above their 20 and 100-day moving average as this is the strongest commodity to the upside out of all sectors as I see no reason to short meal or the grain market, so stay long and continue to place the proper stop loss.
CHART STRUCTURE: POOR
How long does a meaningful consolidation has to last before you enter a trade? In my opinion, I always want to see a consolidation that lasts at least 8 or more weeks before I would consider entering.
I want a longer consolidation to avoid a bunch of false breakouts, such as 10 or 15-day consolidations that happen all the time. I am trying to put the odds in my favor by trading the breakout of at least 8 weeks or more, and the longer, such as a 10 or 13-week consolidation, the better.
If you are looking for a futures broker feel free to contact Michael Seery at 630-408-3325 and he will be more than happy to help you with your trading or visit www.seeryfutures.com
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