My Development as a Commodities Trader: TRADE UPDATE: COFFEE ROBUSTA 2008-09-23

I closed half my short at 1717 today (+263 points). The Jan Contract is will be on notice day from 2nd Jan 2009 (i.e. shorts can issue delivery notice). In addition Liffe has discontinued 5 tonnes (D) contract and replaced by a 10 tonnes contract (RC) so DF9 is the last contract to trade in this series. March contract (RCH9) is trading at 1550 today while DF9 has been very volatile lately as the shorts are squeezed and then longs are squeezed before every one tries to close their positions. However I feel that shorts are in control. The last trading day would be 30th Jan 2009 and I would aim to come of this position fully by then. As of now I am not planning to roll over this position to March.


UPDATE: When going gets tough .... the Dollar gets going

My Development as a Commodities Trader: When going gets tough .... the Dollar gets going

Looks like Dollar bull days are getting numbered now. I have gradually come out of all dollar long positions and now actively looking for oppportunities to short dollar. One place I like to be in would be JPY. Another interesting place is AUD and CAD. Fed recent action are very inflationary and therefore it is a blessing for commodities and commodities driven currencies like AUD and CAD. Another interesting place to be in is EUR mainly because EUR "might" attract some diversifaction funds in search for a stronger currency bloc. 

I will update in coming days if short dollar trades emerge.

TRADE UPDATE: Is silver setting up to outpace Gold?

My Development as a Commodities Trader: Is silver setting up to outpace Gold?

The trade has moved in right direction since the day I posted it. I have now able to build up a suitable position in short GOLD and long Silver with average ratio of 80.

Fed cutting rates to almost 0% is inflationary in nature and may give a rocket boost to commodities and may even plunge dollar. 

It seems time to become commodity bull is coming again. I am keeping an eye on that.


Is silver setting up to outpace Gold?


Buy 16 Silver and Sell 10 Gold futures. 
Stop when GOLD/SILVER > 100

We saw spectecular run up in the the prices of Gold and Silver last year with Gold culminating into an all time high and silver in a significant high before both of these "precious" metals started falling like a stone so far this year.

Silver in particular has fallen by nearly 60% from its high whereas Gold has managed about 34%. This is quite expected as Silver tends to be more volatile of the pair and tends to shoot excessively in both directions (up or down).

Now I made an interesting observation that the last bull market in Silver started in March 1993, nearly 6 years before Aug 1999 when Gold bottomed out. So even though I am oscillating between Bear or Uncertain camp for Gold it "could" be that Silver has seen its correction and may be it is turning its head upwards. 

In addition the Gold/Silver ratio is hovering at 80 after hitting nearly 92.5 in October 2008. Such high readings were noted in 1993 when silver started turning up as I pointed out earlier. The reasonable level for this ratio is 50 and the historical mean level for this ratio is actually 16. This points that silver now is extrement cheap compared to Gold. 

An adventerous trade is actually to buy Silver with stop below 8.40 however in the current climate of volatility it could be safer to trade this as a pair and then cover Gold Short when inflation start raising its head again.


TRADE UPDATE: All that shines is not Gold

My Development as a Commodities Trader: TRADE UPDATE: All that shines is not Gold

I am out of this trade again at 760 (+24 points) though I was hoping to ride is much longer. The range action is frustrating me in most markets and I thank all my guardian angles whenever I can come out profitably on any trade in these markets. I am by nature a trend following trader and therefore the range kills me many times.

The price action on S&P during Friday session rang some alarm bells for me and I was in no mood to leave positions over weekend. In addition Gold did touch my first anticipated breach level (743) but bounced off strongly.

If I see weakness next week I might go in again as I am still not a bull of Gold but for the time being, remaining out of this market seems like a reasonable position to be in.

Rice is Rising

ZRH9 (Rough Rice)
Buy on break above 1426 stop below 1330 target 1559 - 1669

While reviewing grains chart it caught my eye that when all other grains (wheat/soy bean/corn/oats) are making new lows and plunging further, rice seems to be the one which has bounced off smartly and also resisting any down days in other grain complex. Rice has bounced off a long term support and therefore some upside could be possible. I am watching if Rice breaks above 1426 or if 1330 level is not breached before entering the trade.

Since fundamentals come in charts first I will also keep an eye on any fundamentals developing.

Point to note is that rice is bit illiquid on CME and therefore can easily be manipulated so it pays to be on the right side of the manipulators. For the same reason I would look to trade March 09 contract (ZRH9) and not the front month Jan 09 contract (ZRF9).


TRADE UPDATE: All that shines is not Gold

My Development as a Commodities Trader: TRADE UPDATE: All that shines is not Gold

And once again (after the holiday related rally is out of the way) I am back again shorting gold. For a small time I was wondering (when I closed earlier short position - see previous update) that I might have to turn to Gold bull soon. But it seems from chart that the recent rally was nothing but a counter trend push during holiday season (that is why it is a good idea to be out of positions during the mad holiday period).

I have taken April Gold GCJ09 short at 784 area with stops above 853. I am planning to add up to 834 and looking for break of 743/699 and 688 for confirmation of trend. I am targeting 650 as first stop and possibly lower thereafter.

These trades are continuation of main theme in the first update so I am not repeating the arguments. Or simply follow the chain in the trade updates.