With the index funds dumping billions of dollars into commodities and the U.S. dollar still in an overall downtrend, I am bullish commodities across the board. There are some that I like more than others though. Right now I am most bullish on corn and crude oil and see both the fundamentals and technicals pointing to higher prices. With volatility through the roof right now, I recommend employing long-term trading strategies with a low risk and high potential reward.

So far the weather for corn this growing season has been less than favorable. Substantial rains and flooding throughout key growing regions in the Midwest may ultimately damage the supply, causing higher prices. As of the week of June 23, the corn crop was rated at 59 percent of all corn being in the good/excellent condition, compared to 73 percent last year, and a 10-year average of 70 percent at this time. Even the corn that is in the ground right now in good condition can still fail with a drought or dry spell. The substantial rainfall may have done damage to the roots, not allowing them to grow deep enough to withstand a dry spell. I recommend buying the December corn $8/$9 call spread for 25 cents, or $1,250, not including your commissions. That’s your defined risk, and you have a maximum potential of $5,000, or a potential profit of $3,750 after subtracting your premium paid. I like this trade because it is a long-term bullish play on corn with a potential reward three times greater than the risk.

Crude oil has been in a bull market for the past eight years, and I don’t expect that to change in the next six months. I expect crude oil to reach $160-$170 per barrel by year end. There are always some bullish factors for crude oil in this day and age, whether it be a workers’ strike in Nigeria, or other geopolitical tensions. Currently, tensions continue to increase between Israel and Iran. If any military action is taken, I believe my prediction of $160 crude oil is pretty conservative, and we could see $200 crude oil.

Like the corn, I am recommending bullish option strategies with defined risk. I recommend this particular strategy because we may see large enough corrections to shake out a lot of long futures positions. In other words, you could have the right idea and “long term” be on the right side of the market, but still get stopped out and lose money on a straight futures trade. I am recommending buying the December crude oil $150/$160 call spread for $2.50, or about $2,500 plus your commission costs. The maximum potential on this strategy at expiration is $10,000, or a potential profit of $7,500 after you subtract your premium paid.

Feel free to call me to discuss strategies in these markets or others to suit your particular account size and risk tolerance.

Frank D. Cholly is a Senior Market Strategist at Lind Plus, Lind-Waldock’s broker-assisted division. He can be reached at 888-801-9302 or via email at fdcholly@lind-waldock.com.

Past performance is not necessarily indicative of future trading results. Trading advice is based on information taken from trade and statistical services and other sources which Lind-Waldock believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder.

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