Three Little Piggies

Not much to share today – as expected we bounced back a little and large players are doing what they do best, which is shaking out weak hands before an attempt at pushing above 1260. I don’t really have any downside targets and it’s quite possible that we’re going to correct sideways here.

The most interesting chart on my screen estate today however is copper. If you are a sub then you know that I had my eye on copper for various reasons. One is that its lagging behind the push up in equities was the only fly in my ointment. Well, it’s finally showing some signs of life and even more so – it’s pushing in the ‘right’ direction (no, I’m not biased – it’s just a matter of confirming what most my other charts are saying).

More specifically the daily panel is now battling its Net-Line Buy Level (NLBL) – whether it succeeds or not is secondary from a longer term perspective. What I appreciate more is that a floor pattern seems to be more established now. And what I really would like to see is a push above the upper 25-day Bollinger which is currently dropping toward 3.6 – it won’t happen in one straight move of course and a move higher is predicated upon establishing support at the NLBL.

Which brings me back to thinking several moves ahead when planning your game. Look at this chart for a second: We have a BB that’s dropping and will most likely inflict some strong resistance if prices were to push above today or tomorrow. Odds are that copper would bounce back and currently the first downside target area would be the 3.30 cluster. Now imagine if we spend a bit more time at this NLBL and establish a few more highs here. If we then push higher from here we have that 3.4 basecamp to fall back into and although it’s not a huge difference when it comes to trading leveraged futures contracts it can mean the difference between getting margined out and keeping a solid stop intact.

This is an exercise I need you to start getting into the habit of – whenever you look at the charts don’t just consider support and resistance zones. Imagine energy zones and price movements as if it was a living entity, acting and reacting to outside stimuli. More often than not you will find that thinking ahead this way does reflect what eventually happens in reality – plus it’s a great way to structure your trades and consider a possible edge in taking an entry here and now.

For instance – technically copper may just overcome this NLBL and push higher today or tomorrow – I don’t have a crystal ball. But since we saw two long candles leading up to here perhaps waiting for a second or third attempt will pay off. So it doesn’t just matter where we came from and where we just found ourselves – what also matters is how we got here.

Now, I want to also add that ‘technically speaking’ taking that NLBL is the right thing to do. Waiting may cost you a good trade and my attitude is always to take a signal when it presents itself. Rather, be conscious of what I described above which will also lead you into being more disciplined in sticking with your plan (i.e. keeping your stop where it is – no matter what). If you start seeing sideways movement here then your emotions may lead you into missing out on what may turn out to be a good long trade. And if your stop gets hit – that’s fine – you did all you could with the information available to you at the current time. Losing trades happen all the time – plan for them and make dealing with them part of your routine (as scary as that may sound).

Finally, if a long position gets stopped out and the downside seems promising then have no compunction about taking an inverse trade. Leave directional bias to the suckers – plenty of those around. But do not just take an inverse revenge trade without carefully considering the current downside follow through potential.

Does all that make sense? 😉

Two more piggies below for the subs:
[amprotect=nonmember] Charts and commentary below for anyone donning a secret decoder ring. If you are interested in becoming a Gold member then don’t waste time and sign up here. And if you are a Zero or Geronimo subscriber it includes access to all Gold posts, so you actually get double the bang for your buck.
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Let’s talk bonds, which has been correcting just nicely in the past few weeks. However downside momentum has been waning and there now is an attempt at squeezing the shorts a little. That NLBL has a decent chance at being breached but unfortunately my first  target area is fairly nearby at 140 – 141. However, a breach of that may get us all the way into 145. How that plays out in the context of the EOY rally in equities is a good question but sometimes those inverse correlations detach and then resume. If we fail the NLBL there there’s support between 133 – 136 and I have no compunction about playing the other side of this.

Soybean futures just bounced back from a NLBL on the hourly panel – and even if we push above that there’s the upper 25-hour Bollinger at 1237. On the daily panel we see that the 25-day SMA has acted as a concrete wall since that first attempt to overcome it. However, we are now seeing white candles and if we push higher the next level of resistance will be that daily NLBL at 1253. I think that a breach or retest of that NLBL would be the money trade as there is nothing but air looming above leading into 1320.

On the downside soybean futures are however a lot less interesting – a whole cluster of support and we may just bounce back and then stay between that 25-day SMA and the lower 100-day BB line.
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Cheers,