Grain Complex Post USDA Report

Ilan Levy-Mayer |

Amber_Grain.jpg

USDA supply/demand report came out yesterday (June 10th) and I was wondering if the old saying, "Voice from the tomb" would live up to its predictions again.....

If you are not familiar with this one, let me give you an abbreviated version:

An old grain trader was on his deathbed. He calls his family and let them know that the most valuable inheritance is in this strange box. After he passes away, the family rushes to the box wondering if there are gold coins or jewelry...instead, they found an old piece of paper that had some date in there. One of the dates was "buy wheat, July 1st, sell wheat September 10th." No one knows if the family members made a fortune or lost money following this advice, but it is there to point out some seasonality in the grain complex.

Well, we are getting closer to this date, and I have noticed a bit of a bottom formation, perhaps a start of a leg up or perhaps just short covering in the grain complex. Before the report, my inclination was that we are still range bound, and that both markets and the complex as a whole need to break resistance above (marked on the charts).

Daily charts of both wheat and soybeans future contracts below for your review.

Wheat Daily Heiken-Ashi chart

ZWA___Wheat__Globex__Equalized_Active_Daily_Continuation_Heikin_Ashi.png

 

Soybeans Daily Hiekn-Ashi Chart

ZSE___Soybeans__Globex__Equalized_Active_Daily_Continuation_Heikin_Ashi.png

 

After the report came out, my view still holds: while we are seeing some bottoming action, I need to get a confirmation from prices closing above resistance lines above.

What does one do in between? Sit on the sidelines, wait for either breakout above or failure against resistance levels to decide which way to play the market. Buy longer term vertical spreads if they have an opinion on the market. Sell shorter term options on both sides - again selling naked options involves unlimited risk. 

Many ways to trade any market, many ways to lose money in any market and only very few ways to lock in gains - this one is not different. If you need help creating a trading plan, visit our broker assist services.

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