Coffee, Its Largest Move In Weeks
Each evening we focus on the most interesting aspects for the upcoming trading day. The comments are based on observations of the nightly updates of the Futures and Market Bias pages. They are provided for educational purposes only and are not intended to be direct trading advice. Also, keep in mind that these remarks are made up to 12 hours in advance of the markets opening. Therefore, overnight events may alter the outcome of these observations.
At the time this is being published, the S&P Globex Futures are trading 2.90 points lower and the Bond Market Futures are trading up 1 tick.
Today, December Coffee [KCZ9>KCZ9], mentioned over the past several days as a volatility play, had its largest move in 6 weeks. This is another example of why it often pays to watch contracts once they are on the Volatility Explosion List(s). There still may be some opportunity here on the short side as it hit new 3-week highs today but reversed to close poorly (possibly trapping “bottom fishers†on the wrong side of the market).
December Corn [CZ9>CZ9], mentioned last night as a potential Volatility/Pullback short, gapped lower today and closed poorly. If you are a breakout player (or more appropriately a breakdown player), this one may still have some downside left in it. Continue to look for a shorting opportunity here.
Commodities in fast moves often only consolidate for a few days before heading higher. With that said December Gold [GCZ9>GCZ9] and Silver [SIZ9>SIZ9] have begun to consolidate. Look for a buying opportunities here but only if you are comfortable with the extreme recent volatility of these markets.
November Unleaded Gas [HUX9>HUX9], on the Momentum 5 List, is a pattern I call a Trend Knock Out (TKO). This is where a strongly trending future (or stock) sells off and take out (at least) the prior two lows. The theory is that it “knocks out†the weak hands and clears the way for the commodity to trade higher. Look for a buying opportunity here.
Best of luck with your trading on Friday!
Dave Landry
PS-Reminder: Protective stops on every trade!