trading partner Mike Seery to give our readers a weekly recap of the commodity futures market. He has been Senior Analyst for close to 15 years and has extensive knowledge of all of the commodity and option markets......
Crude oil futures in the July contract rallied another $.70 this Friday afternoon trading at 104.45 a barrel hitting new 1 year highs as the trend continues to move to the upside at least here in the short term. The true breakout was when prices broke above 103 in Wednesday’s trade as I would place my stop loss at the 10 day low which is around 98 risking $5 or $5,000 per contract as the chart structure will improve over the next several days as there is strong demand going into the Memorial Day weekend for energy products. Crude oil futures rose almost $3 this week as prices look to head up to the next resistance level of 106 and if that level is broken I think we can retest the 110 level which was hit last August when we had the Syrian conflict and then prices dropped very quickly however this market is quite different as prices are rising due to demand and improving economies around the world as the U.S stock market hit all time highs once again today and with extremely low interest rates looking to stay for many years to come that recipe is very bullish crude oil and all other commodity and equity assets. If you look at this market on a seasonality basis prices generally tend to rise in the months of June, July and August as drivers are hitting the road and it looks like that same trend is already beginning so continue to play this market to the upside and if you currently have missed the recent rally look for a dip to enter.
CHART STRUCTURE: IMPROVING
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Gold futures in the June contract basically traded unchanged for the trading week with very little volatility as this market has gone sideways over the last 7 weeks and is looking to breakout soon in my opinion. If you look at the daily chart we are starting to form a tight wedge and I do think if prices break the critical level of 1,265 the bear market will continue however if prices break out above 1,310 a bottom might be in place and time will only tell so at this point I’m sitting on the sidelines as there is no trend in this market, however this is starting to become an interesting chart, so keep a close eye on those 2 price levels as the longer we consolidate the more powerful the breakout becomes. Gold futures are trading just an eyelash below their 20 and 100 day moving average as volatility is extremely low at the current time so if you’re bullish this market I would look at bull call option spreads because the premiums are relatively cheap and if you’re bearish this market I would look at bear put spreads limiting your risk to what the premium costs as gold certainly will become extremely volatile once again it’s just a matter of time.
CHART STRUCTURE: EXCELLENT
Coffee futures in the July contract are up 55 points this afternoon in New York currently trading at 182 a pound still trading below its 20 day but above its 100 day moving average settling last Friday at 185 as prices are still near 5 week lows. I’m recommending buying the coffee market if you’re lucky enough to get in at the 170 – 175 level as I do think crop estimates which should be coming out in the next couple weeks will show a worse production than anticipated sending prices higher and volatility higher as coffee can have tremendous price swings. The drought in central Brazil was very severe and I don’t think prices can head back down to the 140 level so if your trading a large enough account keep a very close eye on this market because the risk reward is always in your favor if you use a proper money management technique so look to be a buyer if prices should tumble into the low 170s.
CHART STRUCTURE: IMPROVING
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