BLI Stock Short - Update 1

Looking good. Yesterday we couldn't close below the 50sma but today we did. We also made a lower high and a lower low, then closed near the low of the day.

Stochastics are still in the mid-range, so plenty of runway to go lower.

I was considering adding to our position but Friday will be Non-Farm Payroll day and today is Wednesday. So I'd expect tomorrow will be a pretty flat day; probably a Doji candle. 

Then we'll get a reaction to the NFP Report on Friday morning before the market open. There's no telling what the reaction will be ahead of time, so its better to keep the position light. If we get a sizable reaction in our favor, then we'll probably hit our target rather quickly.

BLI Stock Short

Looks like a solid short setup. Noticed on 6/27/21 but waited for confirmation today 6/29/21. This stock has awful options, so I shorted the stock. Since the equity markets have a strong bullish bias, thanks to the Federal Reserve and QE Infinity, shorting is very difficult, so we initially went in very light.

Target is the 61.8% retracement of the yellow range at 41.52.

Stop is above the recent swing high at 51.24.

Entered short 20 shares at $46.85

Stop 52.50

Target 42.00

R:R = (46.85-42.00):(52.50-46.85) = 1:1 not great but this appears to be a high probability setup.

Here's what I see:

• Trend Line resistance, see thin downward angled white line
• 78.6% Fibonacci resistance on the green range
• Stochastics Overbought
• AB=CD Resistance, see 2 thick upward angled white lines
• Bearish Engulfing
• Doji gap down
• Close below 8ema, 6/25/21
• Lower High/Lower Low
• Close below 8ema, 6/29/21
• Close near candle bottom

July Corn Rising - Exit

I've been disappointed by the markets in so many ways over the years but today I was disappointed in a whole new way. Maybe because today's post is number 13 in this thread, or Murphy's Law was being enforced, or the market makers have a secret surveillance camera in my office. Whatever the reason, the probability of this specific outcome was very low, based on the July Wheat and Corn markets past behavior.

As you know, the hedge was a July Put option on Wheat rather than Corn because Wheat has had weaker price action for months. During the duration of this trade Wheat and Corn have had very similar daily moves, and Corn has had more Bullish price action than Wheat.

So, it would be reasonable to assume this behavior would be true today. Therefore, one would expect Corn to retrace faster and higher than Wheat, if indeed there was a retracement. In yesterday's post I said "very often when there's a big move on a given day, the next day sees a retracement". Well, that's exactly what we got.

Except for one thing. The top chart above is the Daily chart for Corn and the bottom chart is for Wheat. Notice how today's Wheat candle retraced further than Corn's.

Well, the strategy was expecting Corn to rise faster than Wheat. If that was true then Corn would have been at higher price when the Wheat Put hedge value dropped back to 13 points, where we bought it. I had entered orders last night to sell the Corn and Hedge contracts when the Hedge hit 13 points.

Since, for the first time, July Wheat moved stronger than Corn, the Corn contract sold at a lower price. Last night the Hedge was worth almost $200 more than the Corn. Is "disappointing" a strong enough word?

Bottom line is we're out. There isn't much time left in the July contracts, and where December commodities go from here is very uncertain, so we're out of Corn and Wheat for now.

Summary:

YW July Exit 638 1/4 - Entry 693 1/2 = -55 1/4 * $10/pt = $-552.50

ZW July 660 Put Exit 12 5/8 - Entry 13 = - 3/8 * $50/pt = $-18.75

YC July Corn Exit 650 1/8 - Entry 689 1/4 = -39.125 * $10/pt = $-391.25

Total $-962.5 Loss.

July Corn Rising - Update 12

Wow, interesting day! The FOMC Meeting press conference yesterday included some discussion on tightening their monetary policy in maybe 2023 (it's currently 6/17/2021; ya gotta be kidding me), and look what happened today. Risk off in most assets. The Federal Reserve is in a roach motel, in a box, that's painted in the corner, inside the Hotel California. In other words, they're stuck with either extreme easy monetary policy, or crashing the markets.

Regarding our Corn trade, first thing to say is our Stop was hit on Wheat. So we're out of July Wheat. For more details, see:

https://jmstweets.blogspot.com/2021/06/wheat-might-make-some-bread-exit.html

After Wheat got whacked for $-552.50, I had to decide whether to also exit Corn and/or the hedge. Corn ended the day at $-576 and the ZW July 660 Put hedge ended the day at $+698. While the hedge more than covered the incremental loss from yesterday, it hardly covers the combined loss of Wheat and Corn, which is about $1,100. So, what to do?

Well, we need to decide whether Corn is going up or down from here, and since the hedge is actually on Wheat, we need to decide on where Wheat is going from here also.

If you go to the link above and see the Wheat chart, you'll see it broke out of the downward Flag channel its been in for about 12 days. It broke to the downside, which was unexpected. It made a slight new swing low. The previous low was 639 1/2 and today's low was 637 1/4. Does this suggest further downside or a double bottom?

I see a possibility for both. Notice the 200sma exactly coincides with the 78.6% Fib of the green range at about 630. Notice also that Stochastics are just about to go oversold. It seems likely that when the market opens up, price can go further down, or gap down, to this 630 level, then reverse and head back up. If this is a Double Bottom pattern, then we're headed much higher.

Another way to look at this is that we've formed a "lower case 'h' " pattern on the Daily chart, after forming a Double Top. This is going back to about April 27th. If this is the "Dreaded 'h'" pattern, or it also qualifies as an "Inverse J-Hook" pattern, then we're going much further down.

So, which is it? There's no way to know before the market closes on us today.

I'll tell you my thinking, but first you need to understand what option Delta means. The Delta value of an option tells you how much the option price will move as a function of a move in the underlying security. Delta is the percentage of the underlying that the option price will move . For example, when we bought the July Wheat 660 Put, the Delta was .514, which I documented in the post that day. That means for each point that the Wheat Futures contract moved downward, the option price would increase by .514 points.

You also need to know that the Delta value is not constant. As the underlying causes the option to move more in the money, the higher the Delta becomes, up to a maximum of 1.0. And the opposite is true. As the underlying price action causes the option to move more out of the money, the lower the Delta becomes, down to a minimum of zero. The amount the Delta value moves relative to the amount the underlying moves is called Gamma, but we can skip that for now.

I bring up Delta because if Wheat goes down further then Delta will increase. In fact, its already increased substantially because the underlying Wheat Futures has dropped considerably since we got the option. Today the option's Delta was .71 at the market Close, up from .514 when we got the option. So now the hedge is increasing by about 70% of the move in the futures rather than about 50%. This is an important consideration in the decision of how to handle the situation we find ourselves in.

Keep in mind that Wheat and Corn have been moving very similarly since this trade began. I expect this to continue for the duration of the trade. So, if Corn reverses and heads back up, I'd expect Wheat to go up as well.

OK, let's look at the Corn chart above. I see a reason to bounce and a reason to continue downward.

See the 2 thin white horizontal lines? We closed right at the same level today. Those lines represent support/resistance levels from late April and mid-May. Look on your 4 hour chart to see them better. We may bounce off these and head back up. Just under those lines, there's a possible Trend Line, the 50% Fibonacci level, the bottom Bollinger Band, and the bottom of the Keltner Channel. These could also provide support. Also, very often when there's a big move on a given day, the next day sees a retracement.

On the other hand, we've made a lower swing high on 6/10/21 vs 5/7/21. That's Bearish. We've been below the 8ema for 4 days. During those 4 days, we've formed a Bearish Engulfing pattern twice. And the Bollinger Bands have been inside the Keltner Channel. Just a little inside, but if those Bollinger Bands flare apart then we may have a release of a BB/KC Squeeze, which would mean Wheat will go down much further. And, Stochastics are still in the mid-range, giving the downside lots of runway.

Bottom line, which way do we think Wheat and Corn will break tomorrow, up or down? Bottom line, we don't know.

Here's my thinking. If we get a bounce, and price heads higher, we'll hold our position until the hedge profit goes to zero, then sell it. We'll break even on the hedge. By the time that happens, the Corn futures contract will have recovered much of its value. The loss at that point will be much more tolerable, and maybe we'll have an indication whether Corn will continue higher or not.

If price heads lower, then the value of the hedge will increase faster than the loss in the Corn Futures contract. Why? Because remember the option is on the ZW $50/pt contract while the YC Corn Futures is $10/pt. The option Delta will be at least 75% and .75 x $50/pt = $37.50/pt for each $10/pt move in Corn. In fact, if Corn and Wheat fall far enough, the hedge should recover all the loss in both the Wheat and the Corn Futures.

Given our current position, if price goes up, we reduce our loss. If price plummets, we could eliminate our loss completely. So, my final decision was to hold both the Corn Futures and the hedge. 

If you are asking why not sell the Corn now, its because it may go up from here. If I thought Corn would just go flat from here until expiration then I'd sell both the Futures and the Option. But I think sideways price action until expiration, while possible, is unlikely.

Wheat Might Make Some Bread - Exit

Wheat got burned today. The 639 Stop was not changed since we entered this trade and it was hit today. It was placed just under the previous swing low, which was 639 1/2. We sold at 638 1/4.

We still have our hedge on, which is a ZW July 660 Put, and it did its job as expected. It protected further losses in both Wheat and our parallel long Corn trade. I considered taking off our Stop since we have a hedge, but decided to let the Stop work because it was unlikely to be hit and we're on the July contract, which expires July 14th. Contracts have already rolled to the Sep. contract.

To continue following this trade, please follow the Corn trade beginning with "July Corn Rising - Update 12". 

Summary, NOT INCLUDING THE HEDGE:

YW Exit 638 1/4 - Entry 693 1/2 = -55 1/4 * $10/pt = $-552.50 "Loss". We won't know the bottom line of this trade until we know how we exited the hedge and the corn contracts.

July Corn Rising - Update 11

Above is a zoomed in view of the daily July Corn chart. We closed with a Doji, just below the 8ema but above the Flag pattern Trend Line. We are in a somewhat neutral situation and therefore still in need of protection.

We had sold off the hedge this morning when Corn was looking strong and appearing to break out of the Flag pattern, again. If we get follow through to the upside and a higher high than the previous swing high at 717 1/2, then this is a very Bullish pattern. But at the moment, there isn't a clear direction.

So, we bought back the July Wheat 660 Put hedge for 13 points.

For more details on this, please see today's post on the parallel Wheat trade:

https://jmstweets.blogspot.com/2021/06/wheat-might-make-some-bread-update-11.html

A good lesson here is the importance of waiting until a candle closes to have a valid interpretation of its signal. This is true on any time-frame. However, there are situations where you already have a strong indication from the previous candle, and you'll need to make a trading decision based on how the next candle begins.

Wheat Might Make Some Bread - Update 11

We started the day session with a strong Bullish move up to the 8ema. As I mentioned in yesterday's post, the July Wheat Futures 660 Put Option hedge we bought yesterday for 15 1/8 would lose value quickly if price starts rising because of the size of the hedge and its proximity to expiration. So, given the strong upward move combined with a fast rate of change in the hedge, I sent the following Tweet at 10:03am ET:

"Seeing some strength in July Wheat and Corn so sold the hedge."

Sold it for 12 points, so the loss was (12 - 15 1/8) * $50/pt = -$156.25.

This decision seemed to be a good one as the futures price continued to rise. But it topped out at 11:51am ET at 672.75 which is both the 8ema on the Daily chart as well as the swing high on 2/24/21, which can serve as resistance. It was marked on our chart. See the then white horizontal line.

By the end of the trading day, price had retraced almost exactly to the open, thereby forming a Doji candle. We were at the middle of the Flag pattern channel, with mid-range Stochastics, and a Doji indecision candle. Where we go from here is a crap shoot.

So, in response I sent the following Tweet just before the close:

"Bought the Wheat hedge back."

This time we got the hedge for 13 points x $50/pt = $650.

By the way, July Corn closed with a Doji, just below the 8ema but above the Flag pattern Trend Line. Stronger position than July Wheat but still in need of protection.

July Corn Rising - Update 10

We made a lower low today but we bounced off the 50sma and closed near the top of today's price range. We're also not far from the 8ema. But we're still under the 8ema and inside the consolidation. We look stronger than Wheat and Soybeans, but we're not so strong that we don't need some protection.

Due to the weakness of our Corn chart as well as on the July Wheat and Soybean charts, we really must exit or take a hedge today. It looks like we could break out to the upside as early as tomorrow, but it would be denial not to address the weakness of our trade today, since we don't know what will happen from here.

Since our parallel long Wheat trade is worse off than the Corn trade, I decided to take the hedge on the Wheat rather than the Corn. The hedge is large enough to protect both the Wheat and the Corn positions.

For a detailed discussion of the trading plan from here, please see today's post on the Wheat trade:

https://jmstweets.blogspot.com/2021/06/wheat-might-make-some-bread-update-10.html

Wheat Might Make Some Bread - Update 10

This time its different. Meaning today's candle went all the way down to the bottom Trend Line and closed far from the 8ema. The past 5 days were more neutral, but today is clearly Bearish. So now, I have to do something about it. Either exit the trade or find a way to hedge it.

The thing is, we could be about ready to break out of this Bullish Flag pattern to the upside. The BB/KC Squeeze is still working and we have no sign of breaking out of that yet, but when we do, we can see a large move. If we break to the downside, we'll definitely hit our Stop which would be a sizable loss. The Entry is 693 1/2 and the Stop is 639. So the loss would be (693.5-639)*$10/pt=$545, plus a similar loss on our parallel corn trade.

There are a number of different ways to take a hedge on this trade, including buying a Put Option or Put Option Spread, sell a Call Option or Call Option Spread, short another grain futures such as Soybeans, or use an appropriate ETF. I decided on buying a July Wheat Futures 660 Put Option for 15 1/8 points with an expiration date of 6/25/2021. The option is on a full size ZW Futures contract ($50/pt) not the YC mini ($10/pt). The cost was 15.125*$50=$756.25 with a Delta of .514.

Since the option underlying futures contract is 5x our long futures contract and the Delta is about 50%, we should see an increase in the value of the option that's 2.5% the change in the Wheat futures. Plus the Delta will increase if the futures continue downward. So, this one option should cover both our Wheat and Corn contracts.

Now there's the question of whether to take off the Stop on our futures contract since we're theoretically covered by the option contract. I think if we come down as far as the Stop, then we're in serious trouble. Since the advantage of holding the futures through the Stop level would be that we don't need to decide where to re-enter the trade and most likely lose some possible profit by waiting for a good buy signal. We also would save on commissions, but they are negligible on this trade.

So given that, plus the fact this futures contract will expire on July 14th, and we need to roll forward to the September contract anyway, I decided to leave the Stop on.

It will be important to liquidate our hedge quickly if sentiment turns around. Because of the size of the hedge and its proximity to expiration, it would lose value quickly.

I try to stay away from fundamentals because there is so much bad information and manipulation out there, but I wanted to include the reason for the deviation of our bullish trajectory at the beginning of this trade is due to a change in the weather forecast for the new September crop in the USA.

July Corn Rising - Update 9

The past 2 trading days formed a Bearish Engulfing candlestick pattern and today's price action provides confirmation we're going lower. My trading style clearly would have me exit this trade then watch it for a possible re-entry long.

However, we found support on the 34ema, and have further support from the 50sma below us as well as the bottom Flag Trend Line and previous support/resistance level at 635. And we have to give consideration that this price action may be a retest of the top Flag Trend Line that overshot the top of the Flag somewhat.

We're also about 75% the way into a Bullish Fry Pan Bottom pattern (its a version of a cup formation). If we recover and the Fry Pan Bottom pattern completes and breaks out we'll have a very strong upward move.

I may have gone off the reservation here, but I think it's worth suspending the rules to give this trade a chance to prove itself.

Wheat Might Make Some Bread - Update 9

Big dip today, but still inside the Bullish Flag candlestick pattern. Notice there was enough buying before the close to get near the 8ema. Also notice the Bollinger Bands are inside the Keltner Channel and Stochastics are mid-range. 

The above observations convinced me to disobey my usual trading style and not sell the position. Being in a messy consolidation, with a Bullish Flag and BB/KC Squeeze forming, suggests I should give less weight to the candlestick analysis, and we'll be getting a breakout soon. So, we want to give this chart wider than usual leeway. 

The counter-argument is that this contract expires on July 14th and the July contract no longer has the highest Open Interest. This could mean we may not break out of this consolidation before expiration. Also, I should consider the possible influence of an emotional resistance to taking a loss if we exited today.

The roll forward from the July contract may be the cause of the less than Bullish price action the past few trading days.

Well, I made my decision and we'll see what happens.

Wheat Might Make Some Bread - Update 8

Wheat gave us a bit of a scare with significant dip, but then rallied and closed right at the 8ema.

We still look relatively weak, but not bad enough to close the position. So, we're holding it over the weekend.

July Corn Rising - Update 8

The bad news is today's candle combined with yesterday's candle form a Bearish Engulfing pattern. The good news is we took a pretty decent dip, but reversed back up to close over the Trend Line and over the 8ema.

So, have to hold it over the weekend.

Wheat Might Make Some Bread - Update 7

I wanted to dump this lazy, depressing, Eeyore of a commodity all day.

Corn has had 2 green happy up days while Wheat has dipped threateningly in the morning then climbs to barely close on or just over the 8ema. Today we formed a Doji candle, which represents indecision.

Since we closed over the 8ema, its not appropriate to exit this trade. So we held the position, but I have repeating visions of the bottom falling out of it. 

However, the probabilities of a Bull Flag is to break out of it to the upside. And inflation and Corn support that outcome. But Soybeans looks Bearish. In fact, if I was long Soybeans, I would have closed out of it today. 

Mixed charts among the grains creates doubt in a grain trade. But you have to trade the instrument you're trading. I wouldn't close Wheat because Soybeans look bearish for example, although I may regret not doing so over the next few trading days.

July Corn Rising - Update 7

Had a very nice Bullish day. Closed above the 8ema and right on the 3ema, after bouncing off the upper Bollinger Band and Keltner Channel. Looks like we decidedly broke out of the Flag pattern.

It would not be unusual to come back down temporarily to test the top Trend Line of the Flag, but I would prefer if we didn't.

Stochastics are just touching the 80% line. If we have another up day tomorrow, we'll probably cross into the overbought area.

I'd love to move up our Stop to break even but we're still too close to do that.

Russell 2000 Bear Scalp - Exit

This started as a scalp trade but the weak and slow overnight trading dragged the price action into today. So you could argue it turned into a swing trade. But scalp or swing, look at that chart!

Yesterday's post called out a target of 2326.20. The last bar on the chart shows it breaking the 2324.90 61.8% Fibonacci retracement I was shading ("shading" means putting your exit a little ahead of the target). As you've seen, if you've been following this blog, trades do not always hit their targets like this.

Net: Entry 2344.70 - Exit 2326.20 = 18.5 points x $5/pt = $92.50 win

If I used the full contract it would have been 18.5 points x $50/pt = $925

July Corn Rising - Update 6

We initially took a dip deeper into the Flag pattern consolidation, but we reversed and closed above the 8ema, the upper Trend Line, and near the highs of the day. Stochastics are still not overbought, which is nice. 

We still need to make a new high that is higher than the swing high 2 days ago before I'll feel on track with this trade, but we're certainly looking better today than we did the last 2 days.

Of course, we held the position.

Wheat Might Make Some Bread - Update 6

Not the most reassuring Close, but we did manage to not close below the 8ema. We're still in the consolidation of the Flag pattern, but our Corn trade, which is happening in parallel to this trade, closed above the Flag.

So, we held the position.

Russell 2000 Bear Scalp

This is a very unusual opportunity for my blog. I normally don't have time to post on a scalp trade in progress. But thanks to the 17:00 - 18:00 ET break in the equity futures market right in the middle of my scalp trade, I do have time.

Above is a 3 minute chart of the RTY (Russell 2000) June Futures. We had almost a straight line move up from 2312.50 to 2347.80. In so doing, we crossed the weekly 1 Standard Deviation (thick orange horizontal line; based on the $VIX and June RTY closes this past Friday 6/11/21). While not perfect, the 1SD is a great resistance level to trade off of (please excuse the poor grammar).

Using the downward angled move from 2337.60 - 2312.50 for a possible symmetrical move (diagonal yellow line segment), I copied it and dropped it from the new swing high at 2347.80. I calculated the end point as  2347.80-(2337.60-2312.50)=2322.70.

I also pulled Fibonacci levels from the new swing high at 2347.80, which shows a 61.8% retracement as 2326.00.

So, given 2322.70 and 2326.00 as possible targets, I chose 2326.20, which is 2 ticks above the higher target.

I entered short at 2344.70 because we had a close below the 8ema followed by a continuation.

Because I believe there is a high probability we will close this week below the 1SD at 2338.77, I picked a Stop far away, and used the mini-contract ($5/pt instead of $50/pt). Specifically the Stop is well over the 2SD level (2390.84) at 2427. This yields a terrible Risk:Reward ratio, but the probability is so high, it would take a black swan event to hit that Stop.

Summary:

Entry 2344.70

Stop 2427.00

Target 2326.20

Its currently 17:36 ET. Market opens at 18:00. Can't wait to see what happens!

July Corn Rising - Update 5

Once again Corn had extremely similar price action to Wheat. So, I'll refer you to that post.

However, Corn has been having stronger candlestick patterns than Wheat. For example, today we formed a Dark Cloud on the Wheat chart, but not the Corn chart. And, Corn closed above the 8ema while Wheat closed right on the 8ema.

Corn is looking stronger (more Bullish) than Wheat, but they're behaving in a parallel manner. So rather than repeat most of the Wheat post, I thought it would be better to provide a link to it:

https://jmstweets.blogspot.com/2021/06/wheat-might-make-some-bread-update-5.html

Wheat Might Make Some Bread - Update 5

Today's price action could be a bad thing or a blessing in disguise. Could be bad because we dipped back rather deeply into the Flag consolidation, and could continue downward in the next session. Could be a blessing because we're filling the gap right away, so we don't need to worry about the gap "attracting" price to fill it in before we reach our target.

Our Bullish long trade hasn't been invalidated by today's big red candle. We did not close below the 8ema or below the lower Trend Line of the Flag. Its more likely its profit taking on a gap up rather than a trend reversal. However, we did form a Dark Cloud candlestick pattern, which is Bearish, but we haven't closed below the 8ema. We've been forming alternating Bullish and Bearish candlestick patterns since the recent swing low on 5/26/21.

• Bullish Engulfing
• Bearish Harami
• Bearish Harami
• Bullish Harami
• Dark Cloud (bearish)

Given the alternating nature, the price consolidation we're in, and mid-range Stochastics, I think we have to give little weight to the candlestick patterns for now.

While its disturbing to fall back into the consolidation after gapping up and breaking through the upper Trend Line, we still have a predominantly Bullish setup. So we need to hold the position, and perhaps tomorrow will be a Turn-around Tuesday.

Wheat Might Make Some Bread - Update 4

We gapped up at the open tonight, Sunday 20:00 ET. This is a very welcome Bullish indication. Corn did the same, and since the hedge was on the Corn futures, I managed the hedge by watching the Corn chart.

To see how that went, please see:

https://jmstweets.blogspot.com/2021/06/july-corn-rising-update-4.html

July Corn Rising - Update 4

At the grains market open Sunday night 20:00 ET you can see on the Daily chart above, on the bottom, we opened with a gap up. When you gap up its a very Bullish indication. Unless the market is overbought and you just witnessed a top, followed by a new down trend.

Stochastics are not yet in the overbought range (>80), but we could see a refill of the gap anyway, followed by a bounce and resumption to the upside. So, rather than sell off the hedge immediately in a giddy sense of euphoria, I went down to the 3 minute chart and looked for a clue which way we were going. If we started down, I would have held all the positions, then sold off the hedge at the top of the flag trend line, and waited for the futures to start back up.

The 3 minute chart is the top chart above. Notice we had a nice drive upward, then a Doji candle formed. There's a rule of thumb that how the next candle starts moving away from a Doji then that is the direction the new candle will continue. The Doji represents indecision, and a decision has been made. Go with it.

So when I saw the candle after the Doji started moving up in earnest, I sold the ZC Jul 600 Put for 2 1/8. But before that I checked the Wheat chart also, because this hedge protected that position also. Our Wheat trade also gapped up at the open.

We opened strongly Bullish after the weekend, so I'm holding the position overnight. We might get a pull back to the Flag and fill the gap. If we do, I'd expect a reversal back to the upside. Overnight trading can be somewhat counter-trend so I may not like what I see in the morning. But the current plan is to hold the position until the day session opens at 9:30am ET and see what happens after that.

Loss from the protective hedge we took Friday is:

 ZC Jul 600 Put Bought for 3 1/4, sold for 2 1/8, which is -1 1/8 pts x $50/pt = $-56.25

July Corn Rising - Update 3

Once again, the July Corn and July Wheat Futures are so similar my comments are the same. Just ignore the comments on the candlestick pattern on the Wheat chart, which does not apply to the Corn chart.

Unfortunately, we did not form a Bullish candlestick pattern today, other than bouncing off the 8ema, closing above the 8ema, having a positive day, and closing near the top of today's trading range.

Please see https://jmstweets.blogspot.com/2021/06/wheat-might-make-some-bread-update-3.html

Wheat Might Make Some Bread - Update 3

In trading, patience often pays off. As much as I wanted to exit this trade yesterday, I clenched my teeth and held, for the reasons I discussed in the previous post. Today I was glad I did.

We bounced off the 8ema and 50sma and closed above both. At the close, we formed a Bullish Harami candlestick pattern. Although, we also just formed a Bearish pattern as of the Close yesterday. So while we're moving sideways on mid-range stochastics we probably shouldn't give much weight to these candle patterns. But still, its reassuring to get a Bullish pattern.

Also, we seem to be forming a Bullish Flag formation. See the 2 thin white downward angled line segments. If we are, it would be relatively short in length to break out of a Flag pattern on the next trading day. So if we're in a Flag pattern and we have a few more days to complete it, then we may make some more lower lows.

Today's price action is definitely telling us to stay in this trade. But today is a Friday which means we have to sit out 2 calendar days, and we may get a few more down days next week. So it makes sense to take some kind of hedge. To that end, I got a ZC corn futures Jul 600 Put option for 3 1/4. The cost is 3 1/4 * $50/pt = $162.50. Our Stop on our long corn trade is 602. But Stops don't work when the market is closed. In this situation you want an option. Since we were willing to use a Stop at 602, the option Strike can be just under that to handle a catastrophic drop in price.

Why corn? Well, we also have a long position in corn as well as this long position in wheat. In both trades we're using the mini-contract, which is $10/pt rather than $50/pt for the full contract. Since the price action on corn and wheat have been extremely similar from the beginning of this trade, and since the value per point is 5x larger for the option than the mini futures contract, I figured the one option for corn will also give us a hedge against a severe drop in wheat.

TXN Long Horns - Exit

Sent the following Tweet 13:48 ET

"Dumped $TXN #TXN due to a Kicker candlestick formation. Details later."

The top chart was captured at 13:46 ET and the bottom chart was captured at 16:00 ET. The patterns are almost identical, except the red candle body at the Close was worse than mid-afternoon, thus validating the decision to exit the trade earlier in the day.

Also, notice on the bottom chart there is no top wick. Both the Open and the High for the day are both 188.32. This means the day session opened gapped down and dropped from there. Zero strength. This led to a gap, and combined with yesterday's candle, a Kicker candlestick pattern was formed.

Unfortunately, we have a very Bearish looking chart, and there was no choice whether to get out of this trade. In fact, if price continues down tomorrow, we should probably short it. If I do, I may not comment on it on the blog. 

I only post on a fraction of the trades I take. Most of my trades are intraday, and I'm too busy trading to blog about it. Plus, I want to focus on swing trades on the blog so I can document trades as they happen day by day. I use the same indicators and strategies on the swing trades as I do on intraday trades.

I would expect TXN to meander down to the downward angled Trend Line, then bounce off and continue higher. But who knows. Anything can happen from here.

Summary:

Entered TXN Jun 190/195 Call Spread on 5/24/21 for $1.97

Exit 6/3/21 for $1.30

Loss .67 * 100 shares = -$67.00

July Corn Rising - Update 2

Again, the July Corn and July Wheat Futures are so similar my comments are the same. Just ignore the comments on the resistance from the 20sma on the Wheat chart, which does not apply to the Corn chart.

Please see https://jmstweets.blogspot.com/2021/06/wheat-might-make-some-bread-update-2.html

Wheat Might Make Some Bread - Update 2

Not a good day. The candles on the daily chart above, for yesterday and the trading day before, formed a Bearish Harami candlestick pattern, as I mentioned on yesterday's post. Today's price action could be argued to show follow through and confirmation of yesterday's Bearish Harami. You can also see we got more resistance from the 20sma.

However, we came back up at the end of the day to close on the 8ema and 50sma. This is a show of strength and support. Given all the Bullish indications that originally got us in this trade, plus how we closed today, suggests it may be too early to bail on this trade.

Stochastics aren't providing any pressure one way or the other. Volume was normal.

In the middle of the day I was feeling the heat and very motivated to close this trade and prevent any further damage. But I knew the right thing to do, in this particular case, was to wait until the close before making a decision. I had to fight my instincts, born from every non-trading experience I've had in life, and do the opposite. I won't know if I'm glad I did until tomorrow when we see what the market wants to do. But for now, I believe waiting until the end of the day was the right thing to do. And by doing so, we got to see price retreat back to the 8ema, which is an important message.

So, putting this all together, and perhaps the improper distaste of taking a loss, I decided to leave the position on and see how we do tomorrow. That's assuming we survive the overnight trading. The Stop and Target were left unchanged.

TXN Long Horns - Update 4

We formed a Bullish Harami candlestick pattern using today's and yesterday's candles. We also closed near the top of today's trading range, and above all the Moving Averages, which is bullish. 

Another possibly bullish setup is that candles have been creeping along in a relatively tight range as the 8ema climbed to meet them. Today's low touched and bounced off the 8ema. This kind of price action often precedes a pop to the upside. Although, the channel made by the candles is usually more horizontal, where this is at a 45 degree angle. The diagonal channel may be a bullish sign, but its very rare in my experience, and frankly I'm not sure if its bullish, bearish, or irrelevant.

On the other hand, see how the red Stochastics line is slightly dipping downward while price is still climbing? That could be the beginning of a Negative Stochastics Divergence. If so, that would be bearish. But its too early to tell.

I'd say the bullish indications outweigh any bearish indications, at least at the moment. Certainly no good reason to close the position.

NKE Just Trade It - Update 1

Thank goodness we used a conditional order to go long. Nike didn't make a new high so our order hasn't triggered. Its still pending in case Nike starts back upward, but it doesn't look promising at the moment. If it starts to look like a lost cause, I'll cancel the order.

And, its not quite ready for a short position, in my opinion. So, we're in watch and wait mode for now.

July Corn Rising - Update 1

Other than the resistance from the 20sma, I have exactly the same comments as the Wheat trade we have going in parallel with the Corn trade.

Please see https://jmstweets.blogspot.com/2021/06/wheat-might-make-some-bread-update-1.html

 

Wheat Might Make Some Bread - Update 1

We formed a Doji candle today. You can see resistance from the 20sma above and support from the 3ema and 8ema below. Stochastics are still in the mid-range.

Technically today and yesterday formed a Bearish Harami candlestick pattern, but I don't believe its a message we're headed lower. A very inconsequential day. We may bobble between these support and resistance levels before breaking out. Of course, my preference would be to break out tomorrow.

Needless to say, we held our long position.

TXN Long Horns - Update 3

We gapped up at the Open, which is Bullish, but then we dropped and engulfed, then closed below the low of, Friday's Doji candle. And we did this on high Stochastics and decent volume. This is Bearish.

However, we closed on the 3ema and above the 8ema, as well as every other Moving Average. This shows relative strength. Since we're not stretched far from the 8ema (in fact we came very close to touching it today), the decision was to hold the position.

Wheat Might Make Some Bread

July Wheat Futures looking Bullish today. Picked up a micro contract ($10/pt) for 693 1/2 at 14:11 ET. Here's what I saw on the Daily chart:

• Bullish Engulfing candlestick pattern
• Bounce off previous Support/Resistance at 672 3/4
• Bounce off 50sma
• Close above 8ema
• Increased volume

Set the Stop just under the previous swing low at 639 1/2.

Targeting the 127.2% Fibonacci Extension which equals the D point of the AB=CD at 817 1/2.

Summary:

Entry: 693 1/2

Stop: 639

Target: 817

Risk: 693 1/2 - 639 = 54 1/2 * $10/pt = $545

Reward: 817 - 693 1/2 = 123 1/2 * $10/pt = $1,235

R:R = 1235/545 = 2.3:1 pretty good.

July Corn Rising

July Corn Futures confirmed a new Bullish trend on the Daily chart. Here's what I see:

• Bounce off 50sma
• Morning Star candlestick pattern
• Close above 8ema
• Scoop pattern
• Gap up today
• Close above all MA's

Targeting the 127.2% Fibonacci Extension = 794 3/8, which is within the expected AB=CD pattern.

Put the Stop just under the recent swing low at 602 3/4.

Using the smaller YC ($10/pt) contract because we haven't closed above the recent swing high yet. Also, where I want to put the Stop, the risk would be too high with the full sized $50/pt contract. Went long a contract at 689 1/4 14:14 ET.

Summary:

Enter: 689 1/4

Stop: 602

Target: 794

Risk: 689 1/4 - 602 = 87 1/4 x $10/pt = $872.50

Reward: 794 - 689 1/4 = $1,047.50

R:R 1047.50/872.50 = 1.2:1 not great but acceptable.