Thought I’d give you the head’s up and let you know that you’ll be seeing some changes in the format of this publication in the next few weeks. Even after nine months, we continue to work hard to make it even better and more relevant for you. ;-)

To tell the truth, we’ve actually got quite a few changes planned, some of which are just plain going-to-knock-your-socks off!

Just to give you an idea of one of the things we have in mind, we are going to change the format slightly and offer more specific market recommendations on each of the markets that are showing promise. After all, we all trade the markets for the sole purpose of making money; therefore we’re going to try harder to make you money by alerting you to the markets that are showing the greatest potential!

Of course we will be continuing with the charts and the education features to help you to learn more about trading and the markets in general, but we have plans for a whole bunch more goodies for you besides that.

In fact I was so excited about the changes that I just had to let you to know a little bit about the plans we have…but you’ll have to be patient for a little while longer, I don’t want to spoil the whole surprise just yet.

Some of these new features are going to require a lot more of our time and money however. Therefore we will be instituting a small charge for subscribers in the future to help cover the costs of producing the publication.

Don’t worry; we’re not talking about hundreds of dollars a month like some other commodity publications charge. We will keep the charge as low as possible to help cover the costs we incur. This will enable us to continue bringing you the best commodity related publication of its kind anywhere. Our sole focus is to help you become better, more profitable traders. Period. Stay tuned next week for more details!

Enjoy this week’s issue.

A bullish Prospective Plantings report spearheaded corn’s rally last week. The report estimated that farmers are planting approximately 79 million acres less of corn this year as in 2002. The report coupled with poor weather forecasts for corn belt helped spur prices higher before encountering resistance around 241 which sent prices lower for the latter part of the week.

This Week:

Look for prices to continue lower off the 241 rebound as the market completes a 123 bottom formation. The market should at least retreat to the support at the top of the gap at 235 before resuming the uptrend. I would not be too surprised to see the market retreat into the gap of last Monday possibly settling on the support at 232.

Once the market has found the 3 point, it would be an excellent opportunity to buy into this market again with reasonable certainty that prices should continue higher. Although the market is not technically bullish until the market breaks the 241 resistance, this could be a good opportunity to enter the market at reduced risk.

Cotton technically made a 3 point in the unconfirmed 123 top formation that has been forming over the last couple of weeks. Even so the brisk demand for cotton has found support for the bulls at this normally bearish time of the year for this market.

This Week:

We may not have seen the last of cotton’s rally just yet. If we see the market break above Friday’s high then we might see the market rally a little longer next week. There is some upward resistance to be found around the 5940 area, but that’s about it until the contract highs at 6055.

As I mentioned before the market has “technically” completed a 123 top formation which is normally bearish. The formation is not confirmed however, until it breaks below support at the 2 point at 5560. If we wait for the market to confirm the 123 top, it will be too late to profit from the formation.

There is significant support at 5700 which should hold the market up if the bulls have their way; however a break below 5700 could signal that the bears have the upper hand, in which case we should see prices continue to decline. If the market breaks below 5700 the next target should be the support at 5440, which also happens to be the 50% level of the recent uptrend, and the target for the possible 123 top.

Bracketing Friday’s high with the support of 5700 would give a very acceptable risk/reward ratio regardless of which direction the market ultimately goes.

Two hips and a hooray! Beans FINALLY emerged from the large trading range. I almost didn’t think it was ever going to happen! It seems that bullish weather forecasts are mostly responsible although increasing export demand also helped to push bean prices higher.

This Week:

Beans are not out of the woods yet. There is some substantial weekly resistance just above the market at 594. In anticipation of the long term resistance the market flinched slightly at the end of the week and formed some resistance at the next contract highs of 591 ½. The strong close on Friday seems to indicate that the market could steam right on through on Monday; however a lot of things can happen over the weekend.

Although we might see a bounce off the 594 resistance, I would not expect the market to retreat too far before finding support at either 583 or 576. The further the market pulls back, the better an opportunity it presents to enter the market with additional long positions. If we do not see a pullback off 594, then we can likely expect the market to retreat from the monthly resistance at 600 before continuing higher.

Once the market is above 600 there does not seem to be too much in the way of beans reaching 625. The long term target for beans is the weekly 50% retracement at 650.

Unusually strong demand for cattle caused prices to pull back a little higher than expected. By the end of the week however the market seemed to have found its limit as resistance formed around 7200. Seasonally this is normally a very bearish time for cattle prices so look for traders not to get too greedy at these price levels and bail out of their long positions at the first sign of weakness.

This Week:

Now that we have some resistance formed look for the market to exhibit bearish signals early next week. A break below Friday’s low will likely trigger the decline.

There is some support on the way down, most notably at 7000 and 6900; however the first real target for the downtrend is the support at 6815 and 6765. I would think we could expect a bounce off either level before the market eventually heads to the weekly 50% level at 6640.

If placing the entry below Friday’s low leaves too much at risk for your account, consider placing an entry order below Friday’s close of 7122. Entering below the close will remove approximately $200 of risk from the trade and improve the overall risk/reward ratio.

While entering below the close is a little riskier than waiting for the market to confirm a breakout, technicals, fundamentals and seasonals are all supporting the notion of lower prices next week so everything should work out.

Recent support at 1892 held last week commercial buying served to hold the market up. While the long term still sees cocoa prices somewhere around 1710 we might expect to see slightly higher prices continue next week.

This Week:

Monday’s action will be instrumental in determining cocoa’s direction for the remainder of the week.

If the market can manage to exceed Friday’s high of 2009, look for prices to continue higher at least to the resistance at 2050. There is some fairly strong resistance in this area which might turn the market back around and heading lower.However if the market can surpass the 2050 resistance and the secondary resistance found at 2075, it should be in position to reach the target of the pullback which is resistance at 2115.

Overall this is a fairly risky counter-trend trade. Initial stops could be placed below Friday’s close which would limit the risk to approximately $200; however we will likely see a bounce of some degree when the market encounters the resistance at 2050 so don’t be too quick moving the stops up.

Sugar emerged out of the descending sideways channel after bouncing off the 50% level. It is not often you see a market make a straight line to the 50% level, although if any market can do it, sugar can.

Trade talk of strong demand in Asia and smaller sugar beet crops in Europe seemed to have caused the breakout. In spite of the bullish news however, the market has run into some pretty substantial resistance at 740 which might hold it back a bit.

This Week:

If we can see the market get above 740 next week it should be a clear signal that the bullish trend will continue. There is more resistance just above Friday’s high around 751 and again at 767, but beyond that the market should be able to test the resistance near the highs at 800.

Sugar seems equally reluctant to commit to a bearish position at this time as well. There is plenty of support below the current market, most notably at the recent lows of 693 and the long term support at 683.

While we might see the market thrash about a bit next week and perhaps trade sideways for a while, I think we will ultimately see the bulls emerge on top and prices eventually continue higher.

Well I have to admit; the Franc caught me a bit by surprise last week. It appeared as though the market was ready to resume the up trend after it had made a classic bounce off the 50% retracement level. The up trend came to an abrupt end however about the middle of the week as the market reacted strongly off the resistance level we pointed out near 7410.

Obviously decreasing concerns about the war with Iraq have taken some of the pressure off the US Dollar and have made the foreign currencies a less attractive investment at this time.

This Week:

It is not quite clear what the Franc intends to do from here. It will most likely continue lower next week at least to re-test the support around the 50% retracement at 7143. If the market continues below here then next logical stop would be support at 7039 which is also the 38% retracement level. If the market continues to slide, look for the Franc to find long term support at 6975.

It will all depend how the Franc reacts off the next support level however, if we are to get a better idea of where the market is going next. While the Franc is an excellent trending market, it also has a tendency to trend sideways when there is no clear market direction. If this is the case we might expect the market to bounce around between the support near the 50% and the resistance near 7410.

Not a whole-heck-of-a-lot happened with silver last week. The market just bounced about a bit as there was a considerable lack of interest in trading. The most notable result of last week’s activities is that silver might have found some support as the market took a slight bounce off of 435.

This Week

Actually I’m inclined just to bracket the range that silver has been in for the last couple of weeks and let the market decide where it wants to go next.

If you made me choose however, I would have to say that we can expect higher prices for silver in the next few weeks. While the market is technically still in a downtrend, the support at 435 as well as bullish seasonal tendencies would lead me to expect higher prices, at least short term.

A break above the resistance at 452 would definitely be seen as a bullish move and would clear the way for the market to advance at least to the resistance at 464 and maybe even 469 before there is a chance that we would see the market stall.

The ambitious among you might want to consider a long position above Friday’s high with initial stops below the low. Things could get a little bumpy as the market finds resistance around 452 however, so you might want to move your stop to break-even to be on the safe side. Overall this is a fairly risky trade.

While the profit potential is not as good, a safer scenario is to wait for the market to breach the 452 resistance before committing to a long position. Again stops could be placed below the low of the day to help minimize risk exposure.

Whatever the reason, the market engaged our order and we are now long one contract in beans!

I’m getting a little nervous however with the resistance just above the market at 594; therefore just to be on the safe side I moved the stops up to the breakeven point at 581 ¾. If the market bounces hard off the 594 resistance we might get stopped out and experience a very small loss if the market is moving really fast, otherwise I’m hoping that the strong close last Friday will set the tone for trading on Monday and the early part of the week.

I know the market will have to make a pullback move soon, as those traders with short contracts reconsider their positions and those traders who are very bullish look for another opportunity to buy in

However since we only have a small account I think we will plan to exit before the monthly resistance at 600 which will likely send the market into a pullback mode.

As a result I have placed an exit order at 597 ½ should the market get that high. After we exit the market we will be on the lookout for another good opportunity to buy into the market, hopefully this time with two contracts.

Summary and Update:

May Soybeans:

• Entry Order: 580 ¾
• Stop Loss Order: 581 ¾
• Short term profit target: 597 ½
• Profit target (long term exit): 623 ¾
• Risk: 6 cents, $300
• Reward: 43 cents, $2150
• Risk/Reward Ratio (RR): 7:
• Risk Level: Moderate to High

Erich

This post is neither a solicitation to trade nor a recommendation of any strategy. Always consult your broker or advisor before attempting any trade. Commodity trading involves substantial risk of loss.

The company that my account is with allows me to directly place orders, stop losses, option purchases, etc. on line. The site is extremely user friendly and the charge is only $10 per round turn. If I create my own trading plan (i.e. entries, exits, stop losses) then why do I need a broker? What can a broker do that I can't do for myself?

Answer:

The short answer is that there isn’t anything a broker can do for you that you can’t do yourself through an online trading service…the question is why would you want to?

Although online services are definitely cheaper than hiring a broker, they are not necessarily the better way to go, especially for the small funded or new traders. Why? Because one mistake in your order entry can literally wipe out your account!

Personally, I would rather pay someone to put my order together for me correctly. Putting the wrong type of order in the wrong place could ruin you financially, and to me it is not worth saving a couple of bucks for that. I'll be a DoItYourself-er for almost anything else, but not for trading. To me it is too risky.

There is a rule of thumb that states whatever you pay in broker commission will likely represent the amount of your account you will give your broker per year. Therefore if you pay $35 round turn, you will approximately spend 35% of your account on commissions per year. Now like all "rules" you need to take it with a grain of salt, but it makes you aware what a large expense commissions can be; having said that however, a good broker can be worth their weight in gold, literally. The difference is finding a real broker vs. a salesman/order taker.

I know a fellow who gladly pays his broker $65 round turn per contract. This fellow's broker has helped him avoid many mistakes and helped him grow his account to a point where he now trades for a living. My friend's trading decisions were all his own, and they were not always right, but they were always tempered with his brokers insights.

A good broker is not easy to find since most "brokers" are just salesman looking to collect a commission. You might have to do some digging to find a real broker, but they are out there, so be persistent. Don't be afraid to ask questions of your potential broker. Ask them how long they've been trading for? Do they trade themselves? If so, which markets? If not, why not? Do they specialize in a certain commodity or trade what looks good to them that day? How do they trade? How often do they trade? How many clients do they have? If you call their office will they have time to talk to you, or are you delegated to one of their assistants? These are all fair questions (given what you will paying) and you have to like the answers you get before you sign on.

I have had one "broker" chasing me for over a year to open an account with their firm. I finally decided I'd give them a shot, but when I called back and asked some questions I discovered that the "broker" was nothing more than an assistant to a senior broker (who was not available to talk to me) and the fellow soliciting me was not a broker himself but was still taking courses to eventually become a broker! Is this the type of person you want to trust your hard earned money to? Not me! He probably knows less about trading and the markets than I do! You need to find someone who is not only competent to take your order, but also provide some insight and opinion to your plan. Remember however, that it is your decision needs to be the final one, and don't let your broker talk you into or out of anything you think is right.

If you do not have a broker yet, you owe it to yourself to speak to the brokers in the reference section of the ezine. Brokers like Tom Loge’ and Kirk Kristian really care about their clients welfare. You can take it from me that a broker like that is not easy to find.

-Erich