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Chart Pattern Secrets

April 23, 2019

Next Alert: 04/25/19

The Trading System: Application of Trading Chart Patterns with Futures and Option Contracts

Copyright © 1997 All rights reserved.

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The dollar made new highs canceling the head and shoulders top. Keep watching for top chart formations.

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02/28/19: The 1-2-3 bottom could be turning into a head and shoulders top formation with the left shoulder left to complete. If the left shoulder completes and prices trade lower through the neckline there is a possible $1400 in profits for a short trade as prices near contract lows.

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03/21/19: Stocks are now above the 50% level with next resistance near 2796 then contract highs of 2955

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03/14/19: Gold prices retreated to the 50% level with1300 as the line in the sand to keep the trend up. 01/31/19: Both gold and silver prices are controlled by the big banks so a cautious long position with protection against the manipulation is recommended. You could go long (buy) the June futures contract and purchase a June at-the-money PUT option for protection. The PUT protects the long futures if the manipulators drive prices down again. You could buy an at-the-money June PUT and CALL. If prices continue moving up close the PUT when it loses $800 of its value and hold the CALL. A more bullish position is a CALL option spread. Buy the near-the-money CALL and sell a higher strike price CALL keeping a minimum of $5000 profit objective between the two strike prices.

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03/12/19: Silver followed gold lower on Friday we’ll keep watching for now.

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04/23/19: CL is at chart resistance and with only 30 days before option expiration, I recommend closing positions if prices trade below 62.22 resistance. Otherwise, take profits at 67.04 03/26/19: CL is up against the 50% retracement level and several closes above this level will keep the trend up. No new trade entries for now. 01/24/19: CALL option implied volatility is low so you could buy June crude oil near-the-money CALL options or CALL option spreads with a minimum profit objective of $5000 between the two strike prices. You could go long (buy) a June futures contract but the stop needs to be below the contract lows, and that’s over $5000 at risk. I would purchase the at-the-money PUT option along with the long futures contract to cover the risk and risk $800 overall on the trade.

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04/23/19: HO prices are now sitting on top of chart resistance. Any closes below that resistance at 204, we recommend closing the positions because we are 30 days from option expiration. 01/24/19: CALL option implied volatility is low so you could buy June heating oil near-the-money CALL options or CALL option spreads with a minimum profit objective of $5000 between the two strike prices. You could go long (buy) a June futures contract but the stop needs to be below the contract lows, and that’s over $5000 at risk. I would purchase the at-the-money PUT option along with the long futures contract to cover the risk and risk $800 overall on the trade.

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04/23/19: RBOB is now above the 50% level and also above our first profit objective. Since we only have about 30 days until option expiration, I recommend taking profits in RBOB unleaded gas because we are now at chart resistance and a pullback could evaporate option premium very quickly. 01/24/19: CALL option implied volatility is low so you could buy June RBOB Gasoline near-the-money CALL options or CALL option spreads with a minimum profit objective of $5000 between the two strike prices. You could go long (buy) a June futures contract but the stop needs to be below the contract lows, and that’s over $5000 at risk. I would purchase the at-the-money PUT option along with the long futures contract to cover the risk and risk $800 overall on the trade.

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03/26/19: Corn prices may be near seasonal lows and the flooding situation in the Corn Belt is far from over. A large number of farmers held back corn in their farm bins from last year’s harvest due to the US and China trade talks and now much of that corn is flooded. And we may not know how much corn is ruined until mid-June when the “grain stocks” report is released. We’ll keep watching for chart patterns to develop.

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04/09/19: There may be a 1-2-3 bottom formation developing. We are switching to the Dec. wheat contract because wheat tends to rally for a longer period of time than corn and soybeans. There is a 1-2-3 bottom possibly building in wheat. If prices move up beyond the number two point consider purchasing a near the money CALL option. 04/02/19: NASS reported March 1 wheat stocks were 1.591 billion bushels, up 96 million from year ago and 30-40 million larger than expected by the trade in pre-report surveys. All wheat planting intentions were smaller than expected at 45.75 million, with Other Spring Wheat at 12.83 million and durum only 1.42 million. Each of those were about 600,000 acres below trade estimates and likely heavily influenced by the snow pack and wet conditions in the Upper Midwest.

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01/29/19: Soybeans have started working higher but the 50% level is stiff resistance. Keep watching for now. 04/02/19: USDA was bull friendly on soybean acreage intentions, finding 84.617 million vs. trade ideas north of 86 million and last year’s 89.196 million. If final plantings match intentions, production could drop below disappearance and eat into the massive carryover by a couple hundred million bushels.

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04/09/19: SM is possibly developing a 1-2-3 bottom. If prices rise above the number two point consider purchasing an at-the-money CALL option with a trading target near the 50% retracement level. Keep watching for now. 03/14/19: SM prices are making new contract lows but a possible 1-2-3 bottom is developing. Keep watching for bottom formations.

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04/04/19: BO hit the profit objective and I advise closing anymore short positions in BO for now. 04/02/19: NASS put soy stocks at a record 2.716 billion bushels on March 1, a whopping 707 million above year ago. However, they were 12 million bushels smaller than the average trade guess. 03/26/19: We could see BO reverse price direction at any time now so look to take profits at the predetermined profit objective or if prices trade through the profit objective use the profit objective of 28.92 as a stop out point. 03/07/19: BO has formed a 50% level h&s top but wait for prices to close below the trend line before considering short positions.

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04/04/19: LC is volatile at this time due to the uncertainty of heard losses due to recent flooding. However, there is an H&S Top if prices continue lower below the neckline. If that occurs you could purchase an at-the-money PUT option with a trading target around the 50% level. 01/29/19: The trend is up and we’ll continue watching for top chart formations. The seasonals project lower prices through April so we could see a top chart develop soon.

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03/19/19: June lean hogs moved higher on short covering after a long price decline.

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02/26/19: Cotton historically follows the grain markets higher in the spring so we’ll keep watching for bottom formations.

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02/26/19: Prices stalled at lower support and may be set to test the 50% level again. We will keep watching for now.

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04/09/19: CC is moving back above the 50% level, keep watching for now.

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2/11/18: It looks as if prices have retreated and the uptrend is over for now. We’ll keep watching for now.

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04/11/19: OJ posted new lows on Tuesday, keep watching for now.

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Disclaimer and Disclosure of Risk Statement

Trading commodity Futures and options on futures involves significant risk.

You must consult licensed professionals or your own advisors before trading to determine if it is suitable for you.

Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. You must consult your broker or advisor before making any trade to insure current prices, margin requirements and other factors determinant to suitability. By reading this publication you agree to make no trade relying in whole or in part on the comments of the writers. You agree before doing any trade contained herein to consult your charts and advisors to verify all information and make your own decision.

All traders should understand that trading in the futures and or options markets is not for everyone. All traders should understand that there is substantial risk of loss when trading futures and or options. All traders should carefully evaluate whether trading in the futures and or options markets is appropriate for them, as such trading is speculative in nature. When trading futures, traders may sustain losses which may exceed their margin deposits. Option purchases may result in the entire loss of premiums paid for such options. Past performance is no guarantee of future success.

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.