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 5

Jan Soybean Daily

Our patience paid off. At least for today. We made a large green candle on respectable volume, but saw some profit taking later in the day. And we made this Bullish move when many markets were red.

We closed above the 8ema and all the Moving Averages we track. Stochastics are still in the mid-range, so no "resistance" from being overbought. 

I was tempted to close out our position with a little profit because there is a big market moving Ag report coming out this Friday 12/9/22 12pm ET. But now the chart is looking Bullish again so it seems premature to exit today when we still have a couple more days.

So, I held our position yet again.

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.

Bullish Jan 2023 Beans - Update 1

Jan Soybeans Daily (yellow annotations)

We had a very nice Bullish day. Got a higher high and higher low. Formed something close to a Doji Sandwich candlestick pattern, which is Bullish. Closed very close but slightly higher (1649 1/2) than the previous swing high (1469). We had strong volume, and higher volume than yesterday. BB/KC continues towards a break out.

Only thing that gives me pause is that Stochastics are overbought (>80).

We definitely want to stay in this trade.

Bullish Jan 2023 Beans

Jan 2023 Soybeans Daily Chart

Went long January Soybeans with a Jan 1450/1460 Call Spread for 5 1/8. Multiplier is $50/pt, so cost was 5 1/8 * $50/pt = $256.25. Today's bean close was 1459 1/2, which means our Call spread is very close to 100% intrinsic value. If the futures price stays over 1460, we'll see the valuation of the option spread widen out from 5 1/8 to 10, which would double our investment. It'll widen out because the time value of the long option will wane as we get closer to expiration on 12/23/2022.

See the yellow annotations on the chart above.

Went long because I see:

• Flag pattern break out.
• Scoop pattern about to break out.
• Bollinger Band/Keltner Channel squeeze about to break out.
• Left/Right Combo candlestick pattern.
• Close above the 8ema, with continuation today.
• High up volume.
• Above all Moving Averages.
• No Grain Reports for at least 1 week.

Soon as the order was filled, which was 14:18 ET, 2 minutes before the grain futures market closed, I entered a sell order for 9 3/4.

The expected bullish move of the Jan Soybean futures price is the D point of the AB=CD pattern (see thick yellow angled lines). D can be calculated from 1406.75 + (1469 - 1366.75) = 1509. This is very close to, but just shy of, the previous swing high of 1512.25.

Summary:

Entry: 1459.

Target: 1509.

Stop: not necessary because our risk is fixed and affordable, thanks to the option spread.

Risk: 256.25

Reward: (9 3/4 - 5 1/8) * 50 = 231.25

R:R = 1:1 which doesn't sound great but expect this a high probability setup.

March Soybeans Formed a Bearish Gartley - Update 1

Wow, that happened fast. Yesterday we had a nice Bearish Gartley pattern, today we had a strong reversal. Today's candle combined with yesterday's candle forms a "Doji Gap Up" candlestick pattern. This is a strong indication of a change in investor sentiment.

When price crossed the 8ema and continued strongly, I decided to avoid greater losses and get out. At 9:36am ET I Tweeted "Dumped the March Soybeans Futures. Details later.". I watched the chart periodically during the day, looking for a reversal but it never came. 

I think exiting was the right strategy, but there's still hope. We're still in a Gartley pattern that hasn't failed. It hasn't even invalidated the D3 point. Neither have we violated the downward Trend Line you'd get if you connected the candle tops for the past 7 days.

I see four likely scenarios from here:

1. We quickly start heading back down.
2. We briefly continue upward but reverse back downward before violating the D3 point.
3. We form a new D point and head back down before violating the X point.
4. We violate the X point and set up a Butterfly pattern.

Because I have no idea which of these will play out, or some other scenario, I don't want to reverse our position to a long trade. Since we don't have an edge, it's better to just monitor the chart until we see a high probability opportunity.

March Soybeans Formed a Bearish Gartley

Been trying to catch the D point on the Daily chart above. The first two, D1 and D2, failed but D3 led to price action breaking through the 8ema and closing below it with confirmation, which gives confidence this is the one. Its looking so weak, I decided to get in short, even though we're pretty far from the 1415 D3 point already. Even down this far, we still have a good Risk/Reward. More on the R:R later.

The proper Stop for a Gartley pattern (aka XABCD) is just above the X point, but that represents too much potential loss (Risk) if we hit it. So, we're using the recent swing high (D3) instead of the X point.

The Target is the usual .618AD, which is the 61.8% Fibonacci retracement of the A point to D point range. You can find all the Targets to consider in the box on the chart.

So, right at the Close today, I shorted a YK mini-contract at 1361 1/4.

Summary:

Entry: 1361 1/4

Stop: 1416

Target 1279 (shaded a little from D3 point to allow for slippage and the Bid/Ask spread)

Risk: 1416 - 1361.25 = 54.75 points * $10/pt = $547.50

Reward: 1361.25 - 1279 = 82.25 points * $10/pt = $822.50

R:R = 822.5/547.5 = 1.5:1 which is actually quite good if you consider the Gartley pattern has a 75% success rate at the .618AD Target.

March Wheat did an about-face - Update 2

We had a gorgeous day for our short position, even though we had relatively low volume due to it being New Year's Eve day. We closed with a lower high and a lower low than yesterday. We also closed under the previous Support/Resistance level that provided support for the past 2 candles, but not today.

And Stochastics are still in the mid-range while the BB/KC Squeeze is about to break out. Things are looking very constructive as of today's Close.

Corn also closed with bearish indications, which lends some indirect support to a short position in Wheat.

There are only 2 grain related USDA reports due out next week. They are both at 3pm ET on Monday 1/3/2022:

• Fats & Oils: Oilseed Crushings, Production, Consumption and Stocks
• Grain Crushings and Co-Products Production

I'm told by respected Ag trader Richard Anderson that usually neither are market moving reports. So, I'll be holding our position through the news release. You can see the schedule here:

https://www.usda.gov/media/agency-reports?start_date=1%2F3%2F2022&end_date=01%2F07%2F2022

If you noticed in yesterday's post I was also short Soybeans, I covered that position at the close today at 1340. Net is 1364 1/2 - 1340 = 24 1/5 points * $10/pt = $245 in the Soybean trade. The full contract would have been 24.5 * $50/pt = $1,225.

I closed it because:

• I'm over-weighted short grains to hold over the weekend.
• March Soybeans could not close below the 8ema yesterday or today.
• Taking the profit is a hedge against Wheat gapping up at the next market open.

Nothing to do now but wait until next year :)

Soybeans and Butterflies - Exit

I woke up early this morning a little after 5:00 am ET. I stumbled into my office and started watching a 5 minute chart. That's the chart on top above. There was a nice cupping pattern, which is supposed to be bullish, but it started to fail and head down, as you can see. We were relatively close to the target of 1357 and had days worth of accumulated profits. I didn't like the way the cup was failing. I've seen some very steep drops occur in the past from such a pattern. Notice it was on high volume with overbought stochastics.

Also, I was cognizant of 2 market sensitive reports coming out tomorrow 8/12/21:

• Crop Production at 12:00
• World Agricultural Production at 12:15

So I quickly sold the position and retained as much of the profits as possible. Looking at the hourly chart above, you'll see we never reached the 1357 target and we did head down pretty far. I'm very pleased with my decision. We may get a bounce and rise up to the original target, but maybe not. I'm glad to capture what I could and miss that little downdraft.

At 5:31am ET I tweeted the equivalent to:

"Closed our long position in the November Soybean Futures Butterfly pattern. Sold at 1351 1/4 at 5:24am ET. Nice profit 1351 1/4 - 1317 1/4 = 34 points. Didn't like what I saw on 5 minute chart, very close to 1357 target."

Summary of the YK Nov Soybean trade:

Entry: 1317 on 1/4 8/4/2021

Exit: 1351 1/4 on 8/11/21

Profit 34 * $10/pt = $340.

If we used the full size ZS contract it would have been 34 * $50/pt = $1,700

Soybeans and Butterflies - Update 4

Above is the hourly chart. You can see we mostly just consolidated today. But we did end the day above the 8ema after receiving support from the 20sma, 34ema, and 50sma. 

Look at the thick white arrow pointing to the 60 minute opening candle starting 20:00 ET, which is the beginning of the overnight session. That candle opened gap down on a weak looking chart. But look what happened. Rather than continuing downward, which would be a reasonable expectation based on the previous day's price action, we closed the gap, and ran up much further. Crossed all the Moving Averages but the 200sma. Then gave up some profit taking leading into the 9:30 spot market open.

But, look at the 9:30 ET open. You can spot it by looking at the volume. The 1st large bar is the opening candle. We opened gapped up above the 8ema and spent most of the day above the Moving Average cluster.

Its reasonable we'll spend more time bobbling between the 50sma and the 200sma, but I think we're looking strong enough to eventually break through the 200sma to the upside.

Staying long for now.

Soybeans and Butterflies - Update 3

Tough call today. The Sunday night trading, after the weekend, continued the bullish trend on the 1 hour chart, as shown above. Then around 3am ET the trend reversed downward until it rejected off support at the 50sma and a confluence of some Fib levels. At 9:30am we rocketed upward until we rejected off resistance at the 200sma. We drifted downward until the Close, where we closed the day below the 8ema.

If you based your decision purely on the candlesticks, you would have definitely closed the position with a profit at the Close. Not a bad decision, but we're still in a Butterfly pattern, which has a high 75% success rate, where "success" means hitting .618AD or higher. Add to that the Stochastics(14,3,3) are now oversold, the 2nd to last candle made a Hammer candle, the bodies of the last 2 candles together made a Bullish Engulfing pattern, and we have some nice padding down to our Stop at 1318.

We could easily continue downward, but I think we're just responding here to a large, green, fast candle that hit the 200sma. We just have to tolerate some respect for the 200sma, hold our break even Stop, and believe the Butterfly odds are in our favor.

The decision for today is to take the riskier stance, since we're in a "risk-free" trade, and the Butterfly odds are in our favor, and hold the position. 

We could have exited with about 1330-1317=13 points profit, but if the pattern works, we'll get 1357-1317=40 points. That's not greedy, that's having patience and seeing the bigger picture.

Soybeans and Butterflies - Update 2

Above is an hourly chart after the market Close. We closed above the 8ema, above the 3ema, and a BB/KC Squeeze Breakout has begun. Stochastics still not overbought. All this is bullish for our long trade.

I had an appointment this afternoon and had to leave at 13:15 ET, so I couldn't be at the computer for the market close. I sent out this Tweet at 11:42 ET:

"Can't be here for the Grains market Close today, but expect to continue holding our long position for the November Soybean Futures Butterfly pattern over the weekend, unless of course it hits our break even Stop at 1318 before today's Close."

Fortunately, things went as expected and we're still long.

P.S. "BB/KC" is Bollinger Bands/Keltner Channel. The BB's are thin, squiggly, light blue lines above and below the candles. The KC boundaries look the same but darker blue. The BB's are based on Standard Deviation, while the KC is based on ATR (Average True Range). Notice how the BB's were inside the KC, then between the last candle and the candle before it, the BB's broke out of the KC. That usually indicates there's about to be a big move.

Soybeans and Butterflies - Update 1

Interesting day on the hourly chart. We made a higher low with the 8/5/21 4am - 5am ET candle. Then we got a nice acceleration to the upside, forming a new swing high, followed by a retracement channel forming a Bullish Flag formation. Finally, we closed right on the 8ema at 1328 1/2.

This is bullish price action, which is encouraging. Of course, we could drop hard overnight. If you look from a higher time frame, this whole upward trend, since the D2 point, could look like a Bearish Flag formation.

Stochastics started downward during the end of day profit taking. This could be interpreted as making room for more upside, or as the beginning of the end of this uptrend.

So the best strategy seems to be holding our position but moving the Stop up to break even (1318).

Soybeans and Butterflies

Top chart is the 4 hour November Soybean Futures chart. The next chart is the 1 hour chart.

On the 4 hour chart you can see price came down and bounced off the 61.8% Fibonacci retracement level of the yellow range. You can also see, at the same time, it was bouncing off a level between the 127.2% and 161.8% Fibonacci extensions of the purple range.

Using the 1 hour chart, you can see a valid Butterfly pattern, where XA is the purple Fib range. The D1 point was an assumed D point for a Gartley, and we did get a good bounce up to 1359, but that fell short of any targets. Then price dropped back down below the X point and led to a Butterfly pattern.

Today we took a sudden drop at 10am ET, but we bottomed out above the D2 point, thus forming a higher low with a tweezer bottom. Then we found some resistance from the 34ema but we closed above the 8ema. Stochastics are not yet overbought. Also, the recovery from the 10am drop formed a Bullish Engulfing candlestick pattern.

I had entered long at 1317 1/4 yesterday using the YK mini-contract ($10/pt) but didn't feel confident enough to post it. With today's price action, I'm feeling more confident.

I don't like that we're between the 8ema and 34ema. It suggests we may bobble between them for a while. Also don't like the Bollinger Bands are inside the Keltner Channel. Although, this sets up a possible BB/KC breakout, which could be very constructive in the near future if we break out to the upside.

Summary:

Entry: 1317 1/4

Stop: 1308 (just below the D2 point)

Target: 1357 (just below the .618AD level)

Risk: 1317 1/4 - 1308 = 9.25 * $10/pt = $92.50

Reward: 1357 - 1317 1/4 = 39.75 * $10/pt = $397.50

R:R = 397.50/92.50 = 4.3:1 which is scary good.

Soybean 15 minute Scalp - Exit

Shot through the heart

and beans to blame

Scalps give trading

a bad name.

   - Bon Jovi

Its very risky to enter a trade pre-market just before the open. Case in point. Chart looked great, but everything often changes when the market opens. Expect to lose trades like this.

Summary:

Enter: 1392 7/8

Exit: 1400 7/8

Loss: $-80

Soybean 15 minute Scalp

See notes on chart. Entered short using YK mini contract ($10/pt) at 1392 7/8 on 15 minute chart right before 8:45am ET break. Price came close to a 61.8% Fib retracement.

Market re-opens 9:30am. If it breaks above the double top by more than a little, then I'll exit quickly and look to possibly re-enter short at the 78.6% Fib.

Entry: 1392 7/8

Stop: 1413 above 78.6% Fib

Target: 1358 at the -27.2% Extension