XLE Re-entry - Update 2

XLE Daily

Well, you can see we had a higher high and higher low today, and we closed above the 3ema. Also, you can see the Bollinger Bands are blossoming outward. These are good bullish indications.

However, we closed near the bottom of the candle, and Stochastics are extremely over bought. Also, we are coming into a previous congestion area from the month of November. These indicate risk of a reversal. If we do reverse, then it'll be a question of how far.

It looks like we might be at an inflection point. We'll probably find out this week. We still have a distance to go to get to our 102.50 Target.

XLE Looks Positive - Exit

XLE Daily

Tough decision today. We closed closer to the low than the high, below the 8ema on high volume. We never got over the downward Trend Line, not even on an intraday basis. Stochastics are still above the mid-range, so there's plenty of room to fall further before worrying about being oversold.

But on the other hand, we're still in the congestion area and haven't broken out to the downside. We could easily reverse this price action tomorrow. Plus we're in an option, so our risk is fixed to the cost of the option.

Bottom line, given the relatively larger candle and higher volume, and the clear resistance from the Trend Line and the 50sma, and the priority of capital preservation over "being right", I decided to take a small loss to avoid taking a bigger loss.

Of course, we can always buy back in if appropriate. To that end, I set an alert for when XLE >= $89.

Summary:

XLE Mar 95 Call bought at 2.22 on 12/21/22, sold 1/3/23 for 1.58

158 - 222 = -$64 per contract.

XLE Looks Positive - Update 1

XLE Daily Chart

Today was a big day for many of the markets, but just noise within the current sideways congestion/consolidation for XLE. We even closed right in the middle of it. A non-material day.

Tomorrow is the trading day before Christmas. I'm told that is an up day about 75% of the time. I'm expecting a reversal in XLE, but not much of a break out from the congestion range.

Bullish Jan 2023 Beans - Exit

Jan Soybeans Daily at 13:30 ET

Jan Soybeans 5 minute at 13:30 ET

We have a big grains related report due out this Friday 12/9/22, which means its more likely we'll continue in a sideways consolidation until the report than have a consolidation break out. We're at the 78.6% Fibonacci level as well as previous resistance.

Considering price was over the upper Bollinger Band after a good acceleration on the Daily chart, the 5 minute chart is starting to roll over, and we had a 24% gain in our position, I decided it would be best if I sell now (13:30 ET).

I sent a Tweet at 13:41 ET announcing I sold, which gave anyone following me 40 minutes to take action if they wanted to.

Summary: I exited today even though we haven't reached our target because I think we'll go down to sideways until the report on Friday, with no clue what will happen in response to the report.

Bought: Jan 1450/1460 Call Spread for 5 1/8 on 11/29/22 (5.125 * $50 = $256.25)

Sold today 13:30 ET for 6 3/8

Profit 6 3/8 - 5 1/8 = 1.25 * $50 = $62.50 (62.50/256.25 = 24% gain) 

Bullish Jan 2023 Beans - Update 4

Jan Soybeans Daily

Jan Soybeans 5min

As you can see on the 5 minute chart above, we drifted upward overnight until the US Service PMI Report was released at 10am ET. The numbers were hotter than expected, which the market interpreted as more Quantitative Tightening by the Federal Reserve, which tanked almost every market, including Soybeans.

However, at the end of the day, the 5 minute chart shows we formed a double bottom and tried to climb higher into the Close. But the Daily chart above shows we bounced off the 200dma and closed under the 8ema, with Stochastics in the mid-range. It looks like we may just go sideways until this Friday 12/9/22 when there's a big Agricultural report at 12:00pm ET.

Unfortunately, sideways price action actually seems the most likely, given the circumstances. If we accept that, then the question is do we sell and limit our losses, or thanks to our fixed maximum loss due to using an option spread, hold our position through the report?

Let's review our Risk:Reward. Even though the Soybean market is moving its price action dynamically, our Target hasn't changed, so the R:R hasn't changed. Maximum risk is what we paid for the option spread, which is 5 1/8. 

And the maximum gain is the width of the option spread, minus the remaining extrinsic value when we hit the Target. The width is 1460 - 1450 = 10. If we get a huge bullish response from the Report, then we can say the spread should be worth close to the width. If we trim off half a point, maybe we're close to a maximum value. So, 10 - 1/2 = 9 1/2. As you can probably tell, I'm kind of fudging here. I could go through a more complicated and time consuming estimate, but I'd still have to guess the response to the Ag Report, so I think it would be a waste of time to do the more in-depth analysis.

So, say a best case for a bullish report and selling at our soybean price Target rather than holding 

the position longer, our Risk is 5 1/8 points and the Reward is 9 1/2 points. 

If we were to sell at the end of the day today, we'd have taken a loss of 1 point. 

Bottom line, I decided its worth waiting to see what tomorrow's price action looks like.

Bullish Jan 2023 Beans - Update 3

Jan Soybeans Daily

Today's candle combined with yesterday's form a Bullish signal called a Bullish Harami. But to be a confirmed signal needs to close over the 8ema, which it didn't.

If you consider the down angled congestion as a Flag Pattern then we have come back down and bounced off it. This is a very Bullish pattern if it follows through.

So, based on these promising, albeit premature, indications, and the fixed risk, thanks to our Vertical Option Spread, led me to leave the position on over the weekend.

Bullish Jan 2023 Beans - Update 2

Jan Soybeans Daily

Looks bad for our long position, but things are not always as they seem. Today's candle, along with the previous 1 or 2 candles, does not make a candlestick sell pattern.

We've had several similar configurations recently, where it looked like we were about to flush to the downside, but then we bounced back upward. Unfortunately, we had more volume today than we did recently, which suggests it might be different this time.

I had said yesterday I was concerned about the overbought Stochastics. Maybe that plus the fact we're in a consolidation, caused a temporary down leg or two. Notice we didn't close below a down sloped trend line. This might just be a retest to be followed by a resumption of the upward price action.

Fortunately, our risk is fixed by the option Call Spread. So, given all this, I decided to hold the position and give the market an opportunity to reverse back into our favor.

July Corn Possibly About To Pop - Update 6

Sent this Tweet 9:34am ET

Sent this Tweet 14:10 ET

July Corn 15 min Close

Leading up to the Corn market open (9:30am ET), and after, the price action was bouncing between the bottom of the Gap and the 38.2% Fibonacci retracement level from the Daily chart. Its Bullish that we're getting strong support, but on the other hand, we don't have enough strength to break out up through the Gap. So its hard to have any conviction which way we break out of this range.

You can see above where I sent out a Tweet just after the Open that we raised the Stop to just under the swing low at the Gap bottom. That held all day. Nearing the end of the day, and the week, I wanted to exit if we saw any weakness. If we didn't see weakness then I want to stay in the trade over the weekend, thinking we'll continue the previous uptrend.

So, I used the existing Stop as a determinant of weakness. The Stop wasn't hit, so we're still long this trade. 

March Bear Corn

Wide Daily View

Narrow Daily View

Entered a short on March Corn Futures from 622 1/4, using a YC mini contract at $10/point, right at the market Close today. ZC is the full sized contract at $50/pt.

The Daily charts above are very busy. Please focus on the light blue annotations. Here are the bearish indications I see:

• 3 Drive to a Top
• Completed AB=CD (see the 2 longest, thick, white, angled, line segments)
• Bounce off Previous High (see the wide view chart)
• Bearish Harami candlestick pattern
• Bearish Engulfing candlestick pattern
• Close below 8ema
• Large candle with Large volume
• Negative Stochastics Divergence
• High Stochastics
• Bounce off Lt Blue 161.8% Fibonacci extension

Selecting the Target at the top of previous congestion, which is coincident with the 50 sma (thick red wavy line). This at about 600.

I set the Stop at 643, just above the recent swing high of 642 1/2.

I think its likely we'll get a bigger pullback but I want to be out of this trade before the big USDA reports on 2/9/22 at 12:00pm ET. Sometimes you see this list abbreviated, or nicknamed, the WASDE Report. Here's the list of reports due out at 12:00

So, in addition to a Stop and a Target, I also entered a conditional order to close out this trade at 11:45am ET on Wednesday 2/9/2022.

Summary:

Entry 622 1/4

Stop 643

Target 602

Risk = 622.25 - 643 = -20.75

Reward = 622.25 - 602 = 20.25

R:R = 1:1 which is worse than the recommended minimum 1:2 ratio but this looks like a high probability trade.

Ag Reports Cut the Corn

Yesterday 1/12/22 at 12:00pm ET there was a big set of Agricultural reports released. You can see the reports schedule here:

https://www.usda.gov/media/agency-reports?start_date=1%2F11%2F2022&end_date=01%2F14%2F2022

Here's the list of reports that came out yesterday:

As often is the case, the chart above is quite busy. Please focus on the green text boxes.

The response to the release yesterday was a long legged Doji candle. This represents indecision. My interpretation is the market needed to digest the information longer than the time left before the Close.

I waited until just before the Close today to check today's price action. As you can see on the Daily chart above, we have a very small wick on the top of the candle followed by a relatively large red down candle, and a close near the bottom of the candle. I interpret that to say the market digested the reports and decided it was Bearish. Who am I to argue.

Over the past few weeks, you can see we rejected off a confluence of Fibonacci levels from 4 different ranges. The high was 617 3/4. Then we formed a triangle going into the big reporting day, which makes sense. The resolution is a break out to the downside. Triangles are notoriously unreliable, in that the price can break out one way and quickly reverse and break out to the opposite side. However, given that the break out is in response to the reports a day after the release, I think we can reasonably expect this is the beginning of a down trend.

Also, notice the significant volume yesterday and today. This looks like the market is serious about this price action. 

Notice the triangle pattern led to a Bollinger Bands/Keltner Channel Squeeze. We haven't broke out of the BB/KC yet, but if price continues down we will. If we break out of the BB/KC we can expect 5-7 days of continued momentum to the down side after the break out.

Stochastics are in the mid-range, so we have some runway here before we need to start worrying about being oversold.

OK, let's consider Targets. In the triangle you'll see 2 thick, green, down angled lines. This illustrates an AB=CD pattern. The calculated D point is 578.25. This coincides with a clone of the triangle top trend line that is positioned at the low of the triangle.

Let's look at Fibonacci levels based on the whole up leg since 9/9/2021 with a low of 506 3/4. The top of the up move is the high of the triangle at 617 3/4. A 50% retrace down is 562.25, and the 61.8% retrace is 549.152. The calculations are shown on the chart in green.

There is a 200sma (thick, white, up angled line) which looks like it might be flattening out at 562 1/2.

I like that the 50% retracement (562.25) and the 200sma (562.5) are very close to the same level. So this seems like a good target for now.

I'm going to use a Stop just above the previous swing high within the triangle at 611 1/4.

Just before the Close at 14:13 ET I sold a YC mini-contract for 587 3/4.

Summary:

Entry: 587 3/4

Stop: 612

Target: 563

Risk: 612 - 587.75 = 24.25

Reward: 587.75 - 563 = 24.75

R:R = 1:1 which isn't great, but I consider this to be a high probability trade, which makes it acceptable.

Paypal may be a friend again - Update 12

There goes yesterday's joy. Today we formed a Bearish Engulfing candlestick pattern. But we also gapped up at the Open, and didn't close below the 8ema. So, no real damage done.

We're still chopping around in this consolidation. Have to remain patient and continue monitoring.

Paypal may be a friend again - Update 11

Today's price action doesn't look like much, but there's something happening here that could be meaningful. Take a good look at today's green candle and the previous trading day's red candle.

Today's candle opened well above the previous candle's close. Then we climbed and closed above the recent congestion. Technically we didn't form a Trend Kicker but we came close to it. We are also approaching the break out level of a Fry Pan Bottom candlestick pattern.

In addition, the Bollinger Bands have pulled inside the Keltner Channel, setting up the possibility of  a BB/KC Squeeze breakout.

These indications, plus Stochastics still in the mid-range, are encouraging to our long thesis.

Paypal may be a friend again - Update 10

We've been just chopping around in a consolidation. We're still above the 2 Fibonacci levels that have been providing support for weeks.

There has been no news and won't be any real news until we either break out of this consolidation to the upside, as I expect we will, or to the downside.

Paypal may be a friend again - Update 9

More chop, but today its in our favor. We closed over the 8ema and above the 161.8% Fibonacci of the green range. We also closed at the top of today's candle.  The ADX crossed again, but at this point its useless because it keeps crossing back and forth in this chop.

It'll take 2 or 3 trading days of green candles to know if we're breaking out of this congestion. So, we're holding our bullish position and keeping our eyes open.

Dec Wheat Bullish Gartley Re-entry - Exit

Target hit! I posted yesterday "My expectation though, is to cut right through it." with regard to the previous consolidation level. This was because we already bounced off it once and came right back, plus we were looking strong after the Ag report came out yesterday. Well, take a look at the Daily chart above. Please just focus on the yellow annotations, and of course, the candles. I think that qualifies as "cutting right through it".

So we hit our 744 target and then some, and its currently only 12:12pm ET as I write this. There's enough time to continue up to the 763 .786AD secondary target, but I'm not trading that one. These Gartley patterns are terrific!

Summary:

Entry 725 3/4

Exit 744

Profit 744 - 725 3/4 = 18 1/4 * $10/pt = $182.50 

If we used the ZW full sized contract: Profit 744 - 725 3/4 = 18 1/4 * $50/pt = $912.50

We've had 3 actual trades within this Gartley pattern since this thread began. Here is the net:

9/20/21 -$120

9/24/21 +$183.75

10/1/21 +$182.50

Net +$246.25 profit. 

If we used the full sized ZW contract it would have been $246.25 * 5 = +$1,231.25

Dec Wheat Bullish Gartley Re-entry - Update 3

Today we got the "Grain Stocks" report. I discussed this in the previous post and a Tweet I sent out this morning at 8:47am ET:

"Big Grains report named "Grain Stocks" coming out 12:00pm ET. Could move ZC_F Corn, ZS_F  Soybeans, ZW_F Wheat markets. Be careful."

Now that we can see the report had a bullish effect on Wheat, we got back in right before the market close at 14:20 ET. Got a YW Futures mini-contract for 725 3/4.

See the Daily chart above. Again, I apologize for how busy the chart is. Just focus on the yellow annotations.

Notice we have a good size green bar on high volume. Had a little bit if a "Doji gap up" and a kind of a Morning Star pattern, but neither pattern is very well formed. We closed above all Moving Averages and made a new high since the D point swing low. The Bollinger Bands and Keltner Channel are beginning to blossom outward. Stochastics are still innocuous in the mid-range. All this is constructive for completion of our Bullish Gartley pattern. I consider completion to be the .618AD point.

However, you can see today's high is right on the double parallel thin white lines, which represented a gap on a much older trade on a much lower time-frame. But now it also represents the heart of the multi-week congestion. This could cause us trouble by providing some resistance. My expectation though, is to cut right through it.

Continuing with our original target of 744 at the Gartley .618AD retracement on the Daily chart. Using a Stop just under today's Open of 711 1/4, at 710.

Summary of our 3rd trade in this daily Gartley pattern:

Entry: 725 3/4

Stop: 710

Target: 744

Risk: 725 3/4 - 710 = 15 3/4

Reward: 744 - 725 3/4 = 18 1/4

R:R = 18.25/15.75 = 1.16:1, not good but acceptable for this high probability setup.

Dec Wheat Bullish Gartley Re-entry - Update 2

Decided to exit the position for the weekend, and capture some profits while avoiding headline risk in a volatile market.

I suspect we'll get a pull back before hitting our target at 744. We're completing an AB/CD pattern, which is expected to offer some resistance. The precise D point is 728 3/4 with the calculation shown on the chart. In addition, a little higher than that, there's a swing high at 733 1/4 (see the thin white parallel lines) which also offer resistance. That swing high is right in the middle of substantial congestion in the recent past  (again, see the thin white parallel lines).

If we got a pull back early next week, it'll be problematic because there's a market sensitive Ag report due out Thu 9/30/21 named the "Grain Stocks" report. We'd want to be out of the market before that report hits. We may be significantly lower than where we are now if we get a pull back before the report.

(https://usda.library.cornell.edu/concern/publications/xg94hp534)

So, I think the best strategy is to take our profits, avoid any bearish news over the weekend when the markets are closed, wait for a pull back due to the resistance I described, then get back in after the Ag report for the ride back up to our target. We already did exit and re-enter once, which turned out to be a good decision.

The chart is still quite Bullish. We made a higher low and a higher high then closed over the 50sma, which was a possible source of resistance, but wasn't. Stochastics are still mid-range, so no pressure from being overbought. Today had higher volume than the past two days. Given a chance to get back in this Gartley pattern with a good entry, I certainly would.

Summary for this part of the trade:

Enter 705

Exit 723 3/8

Profit $183.75

Dec Wheat Bullish Gartley - Update 1

Interesting challenge at the close today to decide whether to exit or hold. 

Today is a Friday, so we have weekend risk. Today and the last 2 days formed a bit of an Evening Star, but its not fully formed. Yesterday and today did form a Bearish Left/Right Combo candlestick pattern.

On the other hand, we didn't close under the 8ema, and Stochastics are not overbought. Today is a little unusual anyway being options and futures expiration day. Also relatively weak volume today. 

I think the most pertinent condition on the daily chart is a "Bobble", which means price is temporarily trapped between a set of moving averages. You can see on the chart, price is bouncing within the range of the 3ema, 8ema, 20sma, 34ema, and 50 sma.

So, given all the above, plus the fact we are using the mini-contract, I decided to hold the position over the weekend.

Dec Wheat Looks Short - Exit

Relative to the bobble we're in, which is at the same level as the previous congestion, it's not really time to exit. A better decision is to wait for confirmation with more upward price action.

However, given that Stochastics are oversold, we closed over the 8ema, and an Ag report is coming out at 15:00 ET today, I think the best decision is to exit and capture the profits we have left, which is about half of the maximum profits we've had during this trade, which was yesterday.

I sent a Tweet at 14:15 ET announcing our exit in case anyone needed to know, which gives 5 minutes until the full contract market close at 14:20 and 30 minutes for the mini-size contract market close at 14:45. I was trading the min-size YW contract.

Bottom line:

Entry: 748

Exit: 738 1/2

Profit: $95.00

Not the $650 profit as planned (see https://jmstweets.blogspot.com/2021/08/dec-wheat-looks-short.html) but at least its a win.

Dec Wheat Looks Short - Update 5

Sticking with the glue analogy mentioned in previous posts. Only thing new today is that Stochastics became oversold for the first time during this trade. 

So, we moved the Target up to the 50% Fibonacci retracement at 702 1/2 instead of the 61.8% Fib retracement.

The previous congestion at this price area lasted 7 days. We've been in it 3 days. So, if we have time symmetry, then we can expect about 4 more days of this chop. If that's what happens I may not post again until something newsworthy happens.