Last week was full of good short-term movements. When everything is in motion and we are not in, it is not wise to enter just to catch a move which already began.
That is why besides some upside opportunities in Soybean Meal and Wheat I see nothing new in the commodities arena. But those setups are not complete. Not yet. They need more time.
That is why I'd like to discuss some real trades. One is an option trade currently in play. The other is the Gold trade I showed last week.
Let's begin with Gold.
Last week I've shown you a screenshot showing my stop and target on already opened position. A few days later my stop was hit. After that, the market fell down and almost reached my target.
Such things happen but why? Can't give an exact answer but I've found out that on many occasions it all comes down to the question:
“Have I entered too early, or was my stop too short?”
Increasing the size of the stop-loss increases the percentage of winning trades. But on the other hand, it is worsening the Risk/Reward ratio.
Having in mind that here we are talking about a position against a strong uptrend I am more inclined to assume that I've entered too early.
COT data shows that small speculators are extremely bullish. That completes the sentiment picture which suggests that the down move can continue. Seasonality also shows that we are entering a period of the year when Gold is usually going down.
From the price action perspective, Gold made a new high and immediately collapsed. I expect my initial target level to be reached maybe even a break below that bottom. Then I'll wait for a pullback and search for a short signal.
Making a new high or low and then an immediate reverse is a strong price action signal. It pays to look for it especially if you have open positions. Like I do with my Corn options (see the screenshot below)
Three months ago in “Standing on the shoulders of giants. Weekly Piece”, 06/02/2019 I suggested that Corn can reach the previous significant bottom. Last week Corn broke below and made a new low. For now, it is holding great, no strong signs of accumulation or price reversals. But if it happens, I'll consider taking profits.
I know I must be sounding like a broken record by repeating “up, long, buy” for the US stock market. But I'll have to do that again.
This week a very important piece of news was published – the ISM Manufacturing index. It hit 49.1 which is its lowest level in three years. Below 50 suggest a recession in the sector.
Bad news but the market completely ignored it and moved up. Then the non-manufacturing PMI came at 56.4. A reading well above the consensus estimate.
That in combination with a strong market breadth and price action suggests that we will see new all-time-highs in SP500.
A pullback towards 2940 is where I'll be looking for a signal to get long.
Founder of Piece of Trading
Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer
Seasonal indicators courtesy of Larry Williams, ireallytrade.com. Charts made with TradeStation®. tradestation.com
Get it today!