A few weeks ago I ran my first on line auction and didn’t really expect too much out of it. After all with only a few weeks left in this year’s ski season I was trying to sell a new snowboard which I never had the opportunity to use. Yet to my pleasant surprise, just as my auction was expiring I got a couple of bids for my snowboard and ended up selling it after all, and at a decent price too.

Now I’m hooked. I look at everything in the house in a new light…dependant on the items auction potential. I’ve already got boxes, padding, packing tape and a host of other packing materials along with a postal scale and ruler (to measure the parcel size).

This week I’m running six auctions, selling everything from my wife’s golf bag to a collectable key ring I’ve had for years to a food dehydrator that we never seem to use. While I understand the global capability and appeal of eBay it is nonetheless amazing to me where some of the potential buyers come from.

Out of my current auctions our food dehydrator seems to be attracting the most attention (don’t ask me why, I don’t know). I’ve had potential buyers email me from several of the States and the UK asking certain questions about the appliance. I would’ve thought that there were food dehydrators to be had locally in some of these places, but I could be wrong. Maybe this could be an untapped market…selling food dehydrators to people in London, England…the potential could be huge! ;-)

One thing eBay seems to have in common with garage sales is that you never can tell what is going to sell. Items I thought would have had a bidding frenzy happening are cold and yet the items I thought I would have to re-list in a future auction seem to be quite popular.

As expected, corn didn’t do a whole-heck-of-a-lot last week as traders hesitate to commit to a position before the release of the Prospective Plantings report due out Monday morning. The report is an important one for the grain markets and should set the tone for the whole complex.

This Week:

If I had to commit to a position in corn before the report I would be bullish. The market is sitting firmly on major support on both the short and long term charts. Traders are really hesitating shorting the market any further without good reason. Fortunately the market confined itself to a small channel formation which we can bracket in anticipation of Monday’s announcement.

The top of the channel is the near matching highs of Monday and Friday at 230 ½ and the bottom of the channel is the current contract low at 227 ¼ which puts approximately $175 at risk.

I’m pretty confident we’ll see a bullish report on Monday which will in turn cause the market to break through the top of the channel. While there are plenty of obstacles to a bull market, but it seems the first serious resistance is found at 238 ¾ from where we can likely expect the market to “bounce” so don’t be too quick to move your stops unless you are just in for the very short term.

First upside profit target for corn would be the daily and weekly resistance at 255 followed by the daily 50% level just below 265 for the longer term.

If we see a bearish report on Monday then we can anticipate a continuation of the downtrend for the next few weeks. First downside target would be the weekly support found at 216 followed by a ton-o-support at 204. Long term downside target could be the support at 197

Cotton prices continued to slide last week before finding support at the 5560 level we pointed out last week. While this is normally a bearish season for cotton, indicators suggest that the market is oversold; therefore we might anticipate a bullish bounce next week as long positions look for a better price to exit the market.

This Week:

There is a fair amount of resistance just above the market at the 5750 which will be the first test of a bullish rally. Just above this resistance is the 50% level of the last downtrend at 5805, so if the resistance at 5750 does not turn the market around the 50% level should.

Both these levels offer a good opportunity to enter the market short, or to add additional positions if you are already short. Traders with larger accounts might consider shorting from these levels, while the more conservative trader should watch for a low closing price, or a day which violates the previous day’s low, as a signal to short the market the following day.

The next downside target would be the support at 5440. Long term downside target is support at 5250.

Looking at the Soybean chart reminds me of a group of sprinters lining up along the starting line in of a race. As with the other grain markets, the USDA Planting report has everyone’s attention. Beans are expecting a very bullish report with plantings expected to be less than forecasted. If so, we could finally see the market break free of the large range which had it confined since last fall.

This Week:

If the report is as bullish as is expected then we should see bean prices easily clear the rather substantial resistance associated with the contract high at 588. Above here there is some weekly resistance at 594 but not too much else to keep the market from the first serious resistance level at 625.

Using Friday’s range to set up a trade would have approximately $250 at risk with a $2200 profit potential if the market sees 625.

If the report is not as bullish as expected then we might see prices bounce off the current highs or the nearby resistance at 583. From here a declining market would likely test the support at 562 followed by more support at 556.

Cattle futures managed to eek out a slight gain last week before encountering the weekly resistance at 7640 where they promptly stopped. Not too much happened for cattle for the remainder of the week; however the low closing prices seemed to suggest that cattle are resisting going higher.

This Week:

Cattle have set themselves up for another very good shorting opportunity as this market continues to stay true to its seasonal tendencies; however this market is closely tied to the grain complex and the major Planting report which is due Monday could affect the meat market as well.

If the grain report is even mildly bullish, which I would expect it would be, look for cattle prices to bounce off current resistance and continue their downtrend. The next stop for cattle would be the support at 6765. With stops above the 7040 resistance this would place about $200 at risk to potentially earn $870 or slightly more than 4:1 RR.

Long term downside target is the weekly 50% retracement level at 6640.

If the grain report is bearish then we could expect the current bear trend in cattle to breakdown and higher prices ensue. A break above the weekly resistance at 7040 would probably confirm this and we could see the market continue higher to the next resistance level at 7165.

Cocoa was on the decline last week but found support near 1900 as buying increased at the lower price levels. Traders seemed hesitant to commit to too many long positions however as threats of violence and continued political tensions in the Ivory Coast spill over into the weekend.

Technically speaking cocoa is at a major crossroads. The daily, weekly and monthly charts all show the market flirting with major support levels. How the market reacts off these levels early next week should set the tone for cocoa in the near future.

This Week:

It looks as though cocoa might try to rally some this week, but I would not get too excited about a long position at this time as the best opportunities still seem to be on the short side. I would not expect the rally to have too much strength to it, but given the unpredictable political environment in the Ivory Coast you never can tell. One thing I do know is that the higher the prices rally the more I would be inclined to short the market.

A weak rally should not get past the mild resistance at 1970. A stronger rally will have to contend with the stronger resistance at 2000 and 2020 and if the market got as high as 2075 I would be shorting with both hands!

Instead of waiting for a potential rally to short from a higher price, a more conservative trade would be to use Friday’s small range to short below the low with stops above the high. This would place approximately $300 at risk. A conservative exit above the weekly support at 1795 should still yield a little over $1000 per contract, which gives a very acceptable 3:1 risk/reward ratio (RR).

While we might see another pause in the decline around 1795 I would not expect the market to stop here. The longer term downside target for cocoa continues to be the firmer support at 1775, followed eventually by the support at 1710.

Sugar finally found its footing last week as it simultaneously encountered the 50% level on the daily charts and the 62% level on the weekly and monthly charts. With all this support below the market, bullish fundamentals and a high closing price last Friday (on an outside day) sugar seems to be shouting that higher prices are around the corner this week.

This Week:

Look for sugar to continue the bounce off the daily 50% level and break out of the descending channel. A break above Friday’s high should see the market rally to resistance around 765-ish. From here we may see a slight bounce before the market attempts to reach the resistance at 800.

Bracketing Friday’s range would have approximately $350 at risk to potentially earn $850 if the market rebounded to the 800 level or approximately at 2 ½:1 RR.

The Franc made a classic bounce off the 50% level last week and appears to have resumed the original uptrend. Worries about a protracted war with Iraq helped to support the Swiss Franc and Euro while the US dollar suffered slightly.

Congratulations to those of you who followed our suggestion of last week by entering the market long on a higher close LAST Monday. Based on Friday’s close you should have profits of approximately $675 per contract so far.

This Week:

The Franc is well known as a market that likes to trend and now that it has “cleared its throat” by completing a 50% retracement it looks as though higher prices should continue for the immediate term.

The first obstacle for the Franc can be found at the resistance at 7410. While we might see the market hesitate at this point for a day or two it is unlikely to reverse the trend. There is more substantial daily and long term resistance to be found slightly higher at 7500 before re-testing the contract highs at 7577.

If the situation in Iraq becomes more difficult in the next few weeks, look for a long term target at the resistance of 7830.

Last week’s weaker US Dollar helped to spur silver prices higher last. While prices were increasing buying was not too aggressive as speculators try to figure out what will become of the war with Iraq and the US economy.

Silver was last week’s Pick of the Letter market, and while we called the direction just fine, we placed our entry order a little too low to be engaged; therefore we are not in this market at this time.

This Week:

While I had been semi-bullish on silver over the last few weeks, this week the market seems to be taking on a more bearish tone. While I believe we should see the market reach the resistance at 452I do not think it will have much more in it than that.

Look for prices to possibly take a bounce off the 452 resistance and continue with the downtrend. The next downside target for silver can be found at the support of 429 and the long term support at 416.

• Entry Order: 434.90 limit
• Stop Loss Exit Order: 428.80 stop
• Profit target (exit): 451.90
• Risk $305
• Profit Potential $845
• Risk/Reward Ratio (RR) 2.77:1

This Week:

We have several markets that are showing good potential this week; however since the purpose of this section is to simulate trading with a $5000 account we will not be able to take advantage of all the opportunities and we have to choose just one.

Beans seemed to have garnered the most interest last week and the small range of last Friday is too much to resist; therefore we will hope for a bullish report on Monday and look at establishing a long position in beans.

Since we will be placing our order after the report is already known it might be difficult to get a good fill; however given the longer term potential of this trade, it is more important for us to get in the right direction that to get in at the “right” price.

As the market advances (assuming a bullish report) there should be AT LEAST one other good buying opportunity, so there is no panic to hurry into this market and leave ourselves with unnecessary risk. The initial stop is a little tight given the potential unpredictability of the market; however once the report is known the market should commit to a direction and stick to it for a few days.

• Entry Order: 580 ¾
• Stop Loss Order: 574 ¾
• Profit target (exit): 623 ¾
• Risk: 6 cents, $300
• Reward: 43 cents, $2150
• Risk/Reward Ratio (RR): 7:1
• Risk Level: Moderate to High

-Erich

 

 

Item	Corn	S Franc	Silver	Soybeans
Ranges
Maximum	3.4	.0170	.125	1.08
Minimum	1.4	.0039	.035	.44
Average	2.3	.0061	.070	.71
Median	2.1	.0049	.072	.65
Mode	1.8	N/A	.080	1.08
Highest	234.0	.7390	4.570	58.14
Lowest	227.2	.7130	4.340	56.42
Breakouts
Maximum	3.4	.0135	.075	.64
Minimum	0.4	.0007	.005	.02
Average	1.4	.0049	.033	.39
Median	1.0	.0040	.035	.48
Mode	0.4	N/A	.035	N/A
Pivot Points
R2	231.2	.7368	4.518	58.35
R1	229.4	.7342	4.475	58.17
Mid	228.8	.7313	4.410	57.80
Pivot	228.4	.7313	4.418	57.87
S1	226.6	.7287	4.375	57.69
S2	225.6	.7258	4.318	57.39
High	230.2	.7340	4.460	58.04
Low	227.4	.7285	4.360	57.56

PLUG: Calculations are performed on the Range Projector panels of SMTP/DTP. SMTP/DTP also provide: (Fib and Gann, dynamic and static) Time and Price calculators, Cluster Discovery and Analysis screens, and an "on-the-fly" Elliott wave extension calculator. 13 tools in all.

My question is when do you move the stop loss? Do you have any suggestions?

Answer:

Stop loss is subject to very personal criteria. Where you place your stop loss has a lot to do with your plans for the trade. I do not usually use time as a criterion for moving my stops however. Stops are usually moved based on your trading plan, and how the market is reacting to it.

For instance, if you are planning a day trade, you would keep mental stops, as any stop loss orders you placed with your broker would likely be within daily range. If your trade was to last for a few days, you might move your stop near the end of each trading day to protect profits. If you have a longer term trade of several days, or weeks, you would likely keep your stop loose to allow for regular market fluctuations. In such an instance you might be moving it every couple of days or so.

It is a good idea to plan your stop loss placement as part of the overall strategy for your trade. For example, if the market has advanced past a particular resistance level that was a cause of concern for you, you might use the breach of the resistance as a signal to move your stop loss under the resistance. Similarly, you might decide to tighten you stops as the market approaches retracement levels (especially the 50%) in anticipation of a bounce.

I'm sorry I can't be too much more specific, but as I said, stop loss placement has many personal variables, and therefore it is difficult to have a set of rules to follow. The best advice I can give is to paper trade and get some practice with stop loss placement.

-Erich