I sent a Tweet out at 7:40am ET this morning "Dec #Corn #Futures looking bullish this morning. If it still looks bullish at the close I'll probably go long.".
Dec Corn Futures started popping yesterday but didn't close over the 8ema. Today at 12:00pm ET we had a high impact crop report. The "Acreage" and "Grain Stocks" reports. I use the following link to see what reports are coming out:
https://www.usda.gov/media/agency-reports?start_date=06%2F29%2F2020&end_date=07%2F03%2F2020
As a technical trader I try to give very little weight to what the report says, and give much weight to how the market reacts to it. I've seen markets go up on good news and down on good news as well as going down on bad news and up on bad news. So the market has taught me its not the news, its the reaction that matters.
Yesterday and the day before formed an Bullish Engulfing candle pattern with Oversold Stochastics. Today we broke through and closed above all of the Moving Averages we follow, except for the 200sma. And we did it on very high volume.
Also, the candles from 6/8/20 through today form a Scoop pattern. Here's a description of the Scoop Pattern:
https://candlestickforum.com/identifying-candlestick-patterns-stock-market-graphs/
Even though the last Corn trade failed, this setup looks like a good one and we have to enter the market with a long position. You have to accept some trades will fail, even if you have a methodology with an edge and a positive expectancy, and your execution is flawless.
However, I am a little concerned about how the market went down before bullish news and the market popped the day BEFORE the report. Read between the lines here. Farshtey?
So, I decided to risk less by using a Call Option or a Mini Contract. I decided to use a Mini Contract to avoid Theta decay and Implied Volatility Crush. This setup looks very strong to me, so I'll take the higher risk of a futures contract vs an option. The symbol for the full $50/point contract on my IB TWS platform is ZC. The symbol for the $10/point mini contract is YC. (Also, I'm spread a little thin with additional trades in wheat and natural gas. I'm not blogging the wheat trade because its very similar to the corn trade but the setup isn't as good. I'm not blogging the natural gas trade because I never traded natural gas before. If you're curious, both trades are long.)
I was filled at 350 3/4 on the Dec YC futures. I use the ZC chart even though I'm using the YC contract. The ZC contract has much more volume and is the "real" contract.
The target is the 61.8% Fib retracement at 373 1/4.
The stop loss is just under today's open at 333.
Risk: 350 3/4 - 333 = 17 3/4.
Reward: 373 1/4 - 350 3/4 = 22 1/2.
R:R 1.27:1 (Not so good. But it looks like a high probability trade and a relatively short term trade, like maybe 1-3 days. Also, I may increase the reward by adding contracts and/or extending the target to the 200sma.)
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