Weekly Update: August 21, 2013

| August 21, 2013

Weekly Update:  August 21, 2013

 

Commodity Watch:

Corn continued higher this week thanks to the slightly bullish WASDE report released last Monday.  It appears the USDA’s decreased yield estimate for this year’s crop was enough to stem the selling in corn- at least for a while.

While it’s unlikely corn will rise much higher due to fundamentals, there’s still a chance of a short covering rally in the near future. 

Chicago corn futures are still highly shorted by speculators, which means any tidbit of additional bullish information could send them running for cover- and send corn prices higher in the process.

I’m on the lookout for signs of a short-covering rally in corn.  If I see a trade, you’ll be the first to know.

Despite the seasonal trend for weak natural gas prices in August, the commodity has pushed higher in recent trading.  However, this is likely just a technical bounce, as fundamentals don’t yet support current prices of $3.47 mmBtu. 

Clearly, tomorrow’s EIA natural gas inventory report will play a crucial role in near term pricing.  Should storage additions come in better than expected, we should see natural gas break back below $3.30 fairly quickly.

After a powerful surge above $1,350 last week, gold spent the past four trading days stuck in the $1,365- $1,375 trading range.  Unfortunately, today’s FOMC meeting notes didn’t provide the needed impetus to push the yellow metal decisively in either direction.  

Be patient with gold, there’s a very good chance it trades higher into year-end, but we’ll need to see a few things fall into line before we have a low risk/high reward trading opportunity.

Let’s get to our open position in oil, along with a recap of our recent silver trade…

 

Portfolio Recap:

. . . . US Oil Fund (USO) September 2013 $36 Puts

Crude is finally starting to break down.  The commodity dropped over $3.50 a barrel in the past two days to close at $103.88 in today’s trading session.  But the best part is, even though this morning’s EIA inventory number still showed a draw in total stocks, the price of crude fell on the day.

What’s that mean?

The oil market is starting to factor in the imminent arrival of September, which usually means weakening demand here in the US.  Barring another massive blowup in the Middle East, we should see more downside for oil soon.

Keep holding the September $36 USO puts for more downside in WTI crude…

. . . . iShares Silver Trust (SLV) October 2013 $19.50 Calls

As you know, we got off to a rocky start here in the Commodity Profit Hunter.  The first three trades of this service ended up being losers. 

However, it’s not that these trades were bad- they just didn’t work. 

And believe me, there’s a big difference between a bad trade and a trade that doesn’t work. 

Let me explain…

A bad trade is the result of personal error.  Maybe it’s a misread technical signal, or possibly an emotional bias that skewed a trader’s judgment.

On the other hand, a trade that simply didn’t work is altogether different. 

You see, whenever you make a trade, you’re taking a calculated risk- whether you like it or not.  The fact is, sometimes a trade will work, and sometimes it won’t.  It doesn’t matter how good the technical and fundamental information is before entering a trade, it could still turn out to be a loser. 

It’s just the way trading works.

But rest assured, in the Commodity Profit Hunter, I only make trades when the potential reward is high and the risk is low.

And as you can see from our most recent trade in silver- when my system works, it really works well.  A gain of 222% is a solid return no matter how you shake it.  And that fact that we got that return in less than two weeks is even better!

Here’s the bottom line…

We’re going to see a few losing trades in this service- there’s just no way around it.  But over a long series of trades, our winners (like the recent silver trade) are going to greatly outweigh our losers.

So all I ask is that you just be patient.   The gains will come!

 

***Editor’s Note*** If you made money in the silver trade, take a minute and drop me a note.  I like hearing about your trading successes.   If you have a complaint, go ahead and send it in as well.  

You can e-mail it to… [email protected]

Just remember, under SEC securities laws, I’m not able to provide personal investment advice.

 

Category: Commodity Trading