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Phase 1, a Classic Story of Buy the Rumor, Sell the News


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Corn (March)

Fundamentals: In yesterdays report we wrote: It will be nice to get some clarity on the trade deal, but I wouldnt hold your breath for something magical to happen. My guess is that Phase-1 is largely an agreement to proceed to Phase-2. This is precisely what happened and prices across the grain sector are reflecting that today. Export sales this morning came in at 784,800 metric tons, 4% above the 4-week average. Our near-term focus will be back on technicals and money flow. We do have option expiration next week, there is a lot of open interest in the 390 calls which could keep a lid on things, not to mention that is also significant resistance. There are also a lot of puts from 380-385, that may offer some support.

Technicals: Yesterday we noted that futures were struggling against 390 -392, saying this is the top end of the range and we have been working with clients to reduce exposure here. For clients who reduced that exposure, we will be looking to get longs back on at better prices. 377-381 is our first meaningful support pocket, being tested this morning.

Bias:Neutral/Bullish

Previous Session Bias:Neutral/Bullish

Resistance: 390 -392***, 407 -411 ****

Pivot: 385

Support: 377-381***, 365-365 ****

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Soybeans (March)

Fundamentals: In yesterdays report we talked about the Phase-1 deal likely falling flat and setting up for a classic buy the rumor, sell the news event, suggesting that the 75-cent rally in December put the market in position for an over-promise, under deliver scenario. Export sales this morning came in at 711,500 metric tons, 3% above the 4-week average. Attention will now shift towards weather and crop development in South America, as well as money flow and technicals.

Technicals: Yesterday we wrote: Our technical support pocket from 933 -937 has been tested each of the last nine sessions. The inability to bounce off support should be a caution flag for the bull camp. A break and close below support opens the door for a potential drop to 920-922 .. This is precisely what we are seeing unfold right now. If that support gives wah we could see prices fall to the December 12th gap, 912.

Bias: Bearish/Neutral

Previous Session Bias:Bearish/Neutral

Resistance: 950 -955***, 968 -970****

Pivot: 933 -937

Support: 920-922 ***, 912-916****

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Chicago Wheat (March)

Fundametnals: Chicago wheat futures made new highs for the move but reversed into the close. The afternoon reversal came on the back of the Phase 1 trade deal falling flat on its face. That has carried over into overnight/early morning weakness in prices. Export sales this morning came in at 650,600 metric tons, 32% above the 4-week average.

Technicals: Yesterday, the market continued its stop hunt above the double top highs from June. Prices have been as much as 15 cents off those highs in the early morning trade. We have been clear on our bearish bias, noting that the risk/reward trade favors the sell side against technical resistance. First support for Chicago wheat comes in from 554 -557 .

Bias: Bearish/Neutral

Previous Session Bias:Bearish/Neutral

Resistance: 575-578 ***, 585**

Support: 554 -557 ***, 536 -538 ***

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Kansas City Wheat (March)

Technicals: Kansas City wheat futures tried to breakout above the psychologically significant $5.00 handle but failed to hold the strength into the close, leading to overnight/early morning weakness. We have had a bullish tilt in our bias for the better part of the last 4 months, yesterdays reversal is putting us back at Neutral.

Bias:Neutral

Previous Session Bias:Neutral/Bullish

Resistance: 498-500**, 509 -513***

Pivot: 488 -490

Support: 470-471 ****, 453 -458 ***

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Cotton (March)

Technicals: Phase-1 lived up to our expectations, which we noted as being a classic buys the rumor, sell the news scenario. We moved our bias to Neutral in yesterdays report and are keeping it there today. If the bulls cannot defend 70.50 on a closing basis, we could see additional pressure take us towards the 67 handle.

Bias: Neutral

Previous Session Bias:Neutral

Resistance: 72.34-72.80****

Pivot: 70.50-71.15

Support: 66.93-67.13***, 62.81-63.73***


Feel free to contact Oliver with any questions or comments

Call or Text: 312-837-3938

Email: Oliver@BlueLineFutures.com


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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC 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. Past performance is not necessarily indicative of future results.



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About the author


Oliver Sloup is Vice President of Blue Line Futures, a leading futures and commodities brokerage firm located at the Chicago Board of Trade. Blue Line Futures mission is to put the customer first, and that means bringing YOU the best customer service, consistent and reliable research and state of the art technology.  Oliver has been a guest on CNBC and Bloomberg, among others.  Oliver has over a decade of trading experience. Prior to Blue Line Futures, Oliver worked as the Director of Managed Futures at iiTRADER.

 

 

Contributing author since 10/6/17 

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