High Risk March Wheat Long

Like the title says, this is a high risk trade at the time I entered it, which was at the Close today for 769. One reason its high risk is because we don't have confirmation yet, which would be a higher Close, or higher high and higher low, by the next trading day or two.

But a much greater reason for high risk is that the quarterly "Grains Stocks Report" is due out tomorrow 12:00pm ET. This can whipsaw the grains markets, and unless you hire Mr. Beeks, the reaction to the report is a craps shoot. So we do not want a position in the market at 12:00pm.

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However, due to what I see on the Daily chart above, the odds suggest we should get some more upside, at least up to the Report release. Here's what I see (yellow box on the chart):

• Bullish Engulfing candlestick pattern
• Doji Sandwich candlestick pattern
• Close over the 8ema
• Low Stochastics
• Tweezer Bottom candlestick pattern
• Support from Head & Shoulders half measured move 1st Target
• Support from AB=CD 760.50 D point
• Support from 200sma

Since its a high risk trade, I'm using a tight Stop of 747, just under the bottom of the previous Doji candle low. Also using the YW $10/pt mini-contract.

For the Target, I'm looking at the 808 1/2 end point of a clone of the previous leg up. See the thick, forward angled, yellow lines. But I'm shading it a bit to the 50sma, which coincides with the Head & Shoulders Neckline, at about 795.

IMPORTANT: I'm setting an automatic conditional order to sell the position, no matter what, at 11:45am ET.

March Wheat did an about-face

Above is today's Daily chart of March Wheat futures right after the grains market closed. Just before the Close I shorted a YW mini-Futures contract at 790. The mini-contract is $10/pt, while the full size contract is $50/pt.

In the previous Wheat trade on this blog I wanted to go long due to a Gartley pattern. That Bullish pattern has not yet been violated, so this is a bit of a contradictory situation. However, my Target for this Bearish trade is above the X point of the Gartley pattern, so both trades can work.

Here is what I saw that caused me to go short today right before the market Close:

• Head & Shoulders
• Bearish engulfing candlestick pattern
• Continuation by the next candle
• Close below the 8ema, 20sma, and 50sma
• Close below the H&S Neckline
• Possible Bollinger Band/Keltner Channel Squeeze
• Possible AB/CD (light blue angled lines)

However, I also see we had support from a previous Support/Resistance level, and we formed a Bullish Harami candlestick pattern. Today we formed a Doji candle which represents indecision.

We could turn right around and head back up from here to hit the Gartley .618AD Target, and we haven't yet confirmed an AB/CD by dropping lower than the B point at about 750.

So, I don't have a lot of confidence in this Bearish trade yet, but there are enough indications where it makes sense to enter the trade, albeit lightly.

I set the Stop at 801. I picked 801 rather than 800 because 800 is a round number. It's just above the H&S Neckline, 8ema, 20sma, and 50sma. It's a bit of a tight Stop, but this is not yet a high probability setup. And if we break through all that resistance, then the downward momentum that got us where we are can't be very strong. So stopping out early might be a good thing.

I set the Target near the 727.643 78.6% Fibonacci level of the yellow range, which coincides with the 200sma, the measured move of the white AB/CD, and shades the light blue AB/CD and the full measured move of the Head & Shoulders.

Summary:

Entered: 790

Stop: 801

Target: 729

Risk: 801 - 790 = 11 points

Reward: 790 - 729 = 61 points

R:R = 61/11 = 1:5.5 which is ridiculously good.

Wheat Marching to a Reversal - Update 1

The previous post showed we were waiting for price to get down to 740 for a long entry. We got down as low as 751, so our order never triggered.

Now, we had a bullish looking day today. We closed over the 8ema, 34ema, and 50sma. We closed over the Head and Shoulders neckline, and closed at the top of the candle. You could also argue we formed a double doji sandwich candlestick pattern, which is bullish. Also, 3 trading days ago we bounced off the 61.8% Fibonacci retracement in the yellow range. However, we haven't yet closed over the 20sma, or even penetrated it.

Do we abandon our thesis that price is coming down to the 740 area because of all the bullish indications above? I'd say not yet. I'd like to see confirmation in the form of a close over the 20sma with Stochastics not in the overbought condition. If we get this tomorrow, then we'd have to conclude we reversed the recent down trend and have entered an up leg, which would rejoin the longer term up trend.

Wheat Marching to a Reversal

The Wheat March Daily chart above looks very busy but its a really cool setup and I'll explain the whole thing. I'll explain the different elements of the setup then pull everything together at the end.

Let's start on the left and work our way right. The big, thick, white, angled, lines represent an AB/CD pattern. The calculated top of the pattern is 856.75 (see calculation on the chart), but the actual top was 874.75. This range is also shown by the large, vertical, green, downward pointing arrow.

The anticipated retracement of the green range is 50%,  61.8% or 78.6%. The box with green text on the chart has the calculations. 50% is 750.75, and 61.8% is 721.5%. Yesterday's candle low was 751, which is only a quarter point shy. You could certainly argue today's bounce was a rejection off the 50% Fib of the green range. If we say we hit the 50% Fibonacci of the green range, and price goes lower, then the next expected move is to the 61.8% Fib.

The yellow range is a possible Gartley (aka XABCD) pattern setting up. The X, A, B, and C points are labeled in white. The D point hasn't been determined yet. The shorter, thick, white, angled, lines represent the AB/CD pattern within the Gartley, and the bottom end of the line on the right is the calculated D point. You can see the calculation in the box with white text. The result is 730.5.

The candle low yesterday and today is finding support at the 61.8% Fib of the yellow range, which is 759. You could certainly argue today's bounce was a rejection off the 61.8% Fib of the yellow range. If we say we hit the 61.8% Fibonacci of the yellow range, and price goes lower, then the next expected move is to the 78.6% Fib.

The purple lines represent a Head & Shoulders pattern. You can see the traditional measured move by the purple vertical line dropping down from the neckline. But, in my experience, the better target is half the measured move. That's represented on the chart with a thin, purple, horizontal line at about 739.

The white, thick, rising, squiggly line near the bottom is the 200sma. It's currently about 721. It's rising at a rate such that it'll easily surpass 721.5 by the time price comes down to it, if price drops that far before reversing. I mention 721.5 because that's the 61.8% retracement of the green range, which is the lowest target.

Stochastics are in the bottom panel of the chart and are only barely in the oversold zone. This tells me it would not be surprising to see lower price from here.

OK, I think we hit all the elements of the chart that warrant consideration. Now I want to tie everything together. Basically, I think we're going a little lower then reversing and heading back up. Here's why:

• The large AB/CD has an expected target of 61.8% Fibonacci retracement of the green range, which is 721.5.
• The AB/CD of the Gartley pattern has an expected target of 730.5.
• There's expected support at the 78.6% Fibonacci level of the yellow range at 727.643.
• The Head & Shoulders has an expected target of 739.
• There is expected support at the 200sma, which is currently 721 and rising.

The highest of these possible bottoms of the current down leg is 739, and the lowest is 721.5. To be conservative, I want to enter a Long position at 740, which shades the 739 level by a point to account for slippage from the Bid/Ask spread and imperfect patterns.

The proper location for a Stop on the Gartley would be just under the X point, which is 687.75. However, even with the mini-wheat futures contract at $10/pt, the risk is a little too high. The risk would be 740 - 687 = 53 points * $10/pt = $530.

To reduce the risk amount, I think we can place the Stop 710. This gives us over a 10 point cushion from the lowest expected reversal point of 721.5. The amount of the risk with this Stop would be 740 - 710 = 30 * $10/pt = $300, which is a more tolerable number.

Using the Gartley pattern to determine a Target, gives us 819.65. This is .618AD, where D is the value at AB=CD, which is 730.5. We'll have to adjust the Target when we have an actual Gartley D point.

So, bottom line is, I entered a conditional order this afternoon to buy a March Wheat mini-contract (YW) with a limit of 740, Stop 710, and Target 818. (818 shades the 819.65 exact Target to account for slippage).

Risk: 740 - 710 = 30 * $10/pt = $300

Reward: 818 - 740 = 78 * $10/pt = $780

R:R = 780/300 = 2.6:1 which is excellent. Especially when considering the Gartley has about a 75% win rate.

Paypal may be a friend again - Update 5

Every equity index was down at the 16:00 ET close today. If you average out the percentages its about .5% down. Meanwhile Paypal closed about .5% up. That's Bullish relative strength.

We're still under the 8ema, and every other Moving Average on the Daily chart above, so we're not out of the woods yet. We didn't form a candlestick pattern but we did make a green candle and closed over the 161.8% Fibonacci extension on both the green and yellow ranges.

If we continue upward from here, we'll be making a higher low, which is Bullish. We could even form a Bullish Inverted Head and Shoulders pattern, but I'm getting ahead of myself.

For now, I think the best decision is to hold our Bullish position.

CRWD Looking Bearish - Update 2

I'm both satisfied and disappointed at the same time. I'm pleased we made a lower low and a lower high than yesterday but would have liked a bigger candle and a close near the bottom of the candle. 

However, we did maintain our volume, Stochastics didn't become oversold, and the Bollinger bands are continuing to widen. So everything is going our way today.

We closed at 232.66, so our 240/235 Put Spread is completely in the money. If we can stay below 235, our spread will be worth the full $5 width at expiration on Friday. 

But if we reach the higher target of 220 with Stochastics oversold and little time left to expiration, I might want to exit at the 220 target rather than waiting for the 210 target and risk an up day that could eat into our profits.

CRWD Looking Bearish - Update 1

Beautiful bearish day. Our Put spread is 240/235, so the maximum value would be 240 - 235 = 5. So in addition to the conditional order to sell the spread when the stock hits 210, I added a limit order of 4.95 for the spread.

If we get a similar size move tomorrow and the next day, then we'll only need 2 more days to hit our target.

CRWD Looking Bearish

Sent a Tweet out 12:06pm ET today that I was shorting CRWD by buying a 8/20/21 240/235 Put Option Spread for about 1.50:

"Shorting CRWD for swing trade. See notes on chart. Details later."

Here's what I noticed today:

• Head & Shoulders with symmetrical timing
• Bearish Engulfing candlestick pattern
• Close below 8ema
• Close below 50sma
• Lower low 2 days ago than the previous swing low
• Bollinger Bands / Keltner Channel breakout
• Blue Ice Failure
• Stochastics mid-range, providing runway to the downside

The chart above is a Daily chart. Some of these observations are obvious and some are not. Let's discuss what needs more explanation. If you have any questions on the rest, please add a comment to this post with your question.

Before we do though, I want to point out I'm a technical trader, not a fundamental trader. So, even if the company is doing well and has a bright future (I have no idea), it doesn't matter to me taking a short term trade. The charts of even the best companies have occasional pull backs. This chart is telling me this stock is about to have one.

The neckline of the Head & Shoulders pattern is very slanted. A horizontal neckline would be ideal. But I've seen plenty of slanted necklines still turn into winning trades. The two thick horizontal line segments at the top show the distance between the head and the tops of the shoulders. Having the same distance from the head to the left shoulder and the head to the right shoulder would be ideal. We have exactly 9 candles to the top of  left shoulder and 9 candles to the top of the right shoulder. Can't get more symmetrical than that. We actually broke through the neckline 2 days ago but I just noticed this chart today.

You can see the Bollinger Bands / Keltner Channel breakout by noticing the light blue squiggly lines have crossed the darker blue squiggly lines from the inside to the outside. This is a strong indicator that whatever the current trend is at the breakout will continue for 5 -7 candles on average. The BB/KC is not 100% accurate, like every other indicator, but I have had good luck with it. Bollinger Band's are a function of Standard Deviation. The Keltner Channel is a function of Average True Range.

"Blue Ice Failure" is a pattern I learned from Steven Bigalow of candlestickforum.com. It means that price breaks through the 50sma, then reverses and tried to cross back over the 50sma but fails to do so, and continues downward. Its too early to tell if we have that pattern, but we certainly do have the beginning of it.

The first target, for me, on a Head & Shoulders pattern is half the projected measured move. But we already hit that the day of the breakout. So, I'm going to name the second target as the "first target", which is the full length of the Head & Shoulders pattern projected measured move. This is about 200.

The next target is the 200sma, which is the thick, white, diagonal, squiggly line. Read my profile to get a link to a description of all my indicators. This is estimated to be about 210, but its impossible to know exactly where the 200sma will be when price gets down to it.

Today at 11:52am ET I bought a 8/20/21 240/235 Put Option Spread for 1.33. If this trade goes as planned, then this spread will be worth 5.00 at expiration this coming Friday.

Summary:

Entry: $133

Target: CRWD = 210

Stop: None needed with an affordable option.

Risk: $133

Reward: $500 - 133 = $367, not including commission.

R:R = 367/133 = 1:2.76, which is very good.

Corn Dec Hourly Inverted Head & Shoulders - Exit

The chart above is an hourly chart after the corn market closed. You can see our 560 target was hit and the Inverted Head & Shoulders measured move was fulfilled with shockingly accurate precision. However, there was a rejection of a 200sma on the 4 hour chart. It looked like this rejection may well be the top of this price move for the rest of the week, so I got out a little earlier than than the planned target at 560.

At 9:39am ET I sent the following Tweet and 1 hour chart:

"December hourly Corn Futures hit 1st target. Moved balance of position to breakeven at 540. Next target 560." 

At 10:59am ET I sent the following Tweet and 4 hour chart:

"December hourly Corn Futures exited a little early at 556 1/2 vs 560 because I looked at 4 hr chart and saw the 200sma was sitting just below the target, and price rejected off it. Nice profit from this trade."

I was not expecting to hit our targets today, but I'm very happy we did. There's a good chance price will continue upward to fill the gap, but we may take a bit of a dip first. Notice how overbought the Stochastics are. So, I want to take a break here and see how the chart behaves from here.

Summary:

1 YC Dec Fut 547 - 537 1/2 = 9.5 * $10/pt = +$95

1 YC Dec Fut 556 1/2 - 539 1/4 = 17.25 * $10/pt = +$172.50

Profit $95 + 172.50 = $267.50

If we used the full ZC contract at $50/pt, the profit would have been $1,337.50

Corn Dec Hourly Inverted Head & Shoulders

Sent this Tweet 9:31am ET this morning:

"Dec Corn broke inverted Head & Shoulders this morning on USA CPI Report. We're long with first Target 547."

Here's the 9:27am ET chart I sent with the Tweet:

You can see on this chart at the market open that price had broken through and closed above the Inverted Head and Shoulders neckline. The upper, thick, yellow, vertical line is the measured move for a Head & Shoulders pattern. The thin, yellow, horizontal line is the halfway point at about 547. I have found that many more Head & Shoulder patterns reach the halfway point than the full extension. So I like to set the first target to the halfway point.

The top chart is the Daily chart and the chart underneath it is the Hourly chart. Both were captured after the close. On the Daily chart and the early morning chart you can see there was a gap down from 573 1/2 to 552 1/4 from 7/2/21 to 7/6/21 over the Independence Day holiday.

Since open gap's like to be filled, and we have an Inverted Head & Shoulders breakout, its a reasonable expectation for price to continue up into the gap.You'll also notice the I.H&S breakout is also a Frypan Bottom breakout.

The top 2 charts show price closed over the 8ema on the Hourly chart as well as on the Daily chart. On the Daily, we also had a Hammer candle on overbought Stochastics followed by a Bullish Engulfing candle.

All this suggests we have a significantly bullish set up. Even though, it is normal to briefly reverse and retest the neckline before continuing upward. We may get this tonight when the market re-opens at 8pm ET.

We entered long 8:41am ET at 537 1/2 using the YC Dec futures contract. Went long another one 9:49am at 539 1/4. Set the first target at half the I.H&S measured move at 547. Set the second target at 560, which is just under the full measured move. I think there's a good chance we'll go higher and get close to the top of the gap at 573 1/2, but I want to see what the price action looks like after the second target is hit before adding a third contract.

Today's high on my Interactive Brokers ZC chart shows as 547. Our target was 547 but the sell limit order wasn't triggered. Maybe its the difference in the Bid/Ask spread on the YC contract vs the ZC contract, but I did shade the actual target from 547 1/2 to 547, which should have taken care of a 2 tick price difference. Well, the drawing of the measured move is a bit of an inexact construction anyway, but to hit 547 on ZC and not trigger our order is quite frustrating. Bottom line is we're still long 2 contracts.

On the Hourly chart you can see we got some resistance from the 200sma. If we're going exit with a profit we'll have to get through and close over that line. But the 200sma is often a powerful support/resistance level which is respected by the price action. This means its likely we'll head back down to the neckline. Then the crucial retest will tell us if we continue back up towards our targets, or not, which would mean the halfway point of the measured move is all we get, and I've seen that happen in the past.

I set the Stop to 526 which is just below the 527 1/2 most recent swing low.

Summary:

Bought 1 YC Dec Fut 537 1/2, Stop 526, Target 547

Bought 1 YC Dec Fut 539 1/4, Stop 526, Target 560

Risk: ((537.5-526)+(539.25-526))*$10/pt=$247.50

Reward: ((547-537.5)+(560-539.25))*$10/pt=$302.50

R:R=302.50/247.50=1.2:1 Not great but acceptable on a high probability setup.

Russell 2000 Possible Short

The chart above is a 4 hour chart, saved on 4/12/21 at 1:30pm ET. It's a busy chart so try to look at just the aspect that is being discussed.

First notice the big, thick, white, diagonal lines. These form a possible AB/CD pattern. The D point for an AB=CD 1:1 ratio can be calculated by 2306.40 - (2366.00 - 2092.70) = 2033.10 (I'm aware the trailing 0's after the decimal are superfluous. They're included for clarity when looking for those numbers on the chart). 

Notice the D point coincides with the 161.8% Fibonacci Extension of both the yellow range (2045.30) and the purple range (2042.80). These levels are also on the way down to the 27.2% Fib Extension of the green range (2018.26).

So far, we've identified a good 1st target area. We'll set the target to just above the highest point of resistance we've found, at 2046.

At the current time, price is just drifting sideways. This sideways movement has created a BB/KC Squeeze. Notice the Bollinger Bands are inside the Keltner Channel. This is not a confident place to enter a short trade. We want some kind of confirmation we're going to break to the downside rather than the upside. So, we'll enter when price has made a new swing low. The most recent swing low has been at 2206.70. We'll enter a Sell Stop order at 2206.

If our short is triggered, and we reach our target, then we'll have breached the large Head & Shoulders pattern. The pattern is indicated with a thick, white, vertical line, and the thick, white, slightly angled Neckline at the armpits. If we breach the Neckline, then we'll copy and move the vertical line such that the top of the line is on the Neckline at the break out point. This is the traditional measured move for a Head & Shoulders pattern. You can easily see the measured move will have an expected target for the H&S breakout far below our 1st target. 

So, if we hit our 1st target, then we'll wait for price to bounce back up and retest the H&S Neckline, and start back down. When we see that, it would be a good time to re-enter this short position with a lower target. But we have a long way to go before we need to worry about that trade.

Summary:

4/12/21 4 Hr (M2K $5/pt)

Entry: Sell Stop 2206

Stop: 2254

Target: 2046

Risk: 2206-2254=48*$5=$240

Reward: 2206-2046=160*$5=$800

R:R=3.3:1

Possible GLD Targets to the Downside - Update 1

Remember the "Possible GLD Targets to the Downside" post from 11/24/2020 (https://jmstweets.blogspot.com/2020/11/possible-gld-targets-to-downside.html)? The last target on the list was 158.46. Yesterday's low in GLD was 158.43 and today's low was 158.55.

I think this is where we make a low and bounce higher. I think so because we're at a significant Fib level that coincides with a previous congestion area back in May of 2020, we're exactly at the recent Head & Shoulders projection, and Stochastics are very low. But if we continue lower, here are a couple additional targets.

147.33 (green 50%)

136.21 (green 61.8%)

120.39 (green 78.6%)

Since I think its likely we bounce from here, I got some options:

GLD Apr 160 Call's for $3.44 (x100 shares = $344).