Happy New Year and Happy Trading Birthday!

Happy New Year and Happy Trading Birthday!

Happy New Year to you, dear Reader and Happy Trading Birthday to me! Yep, at the beginning of 2002, exactly 18 years now, my trading adventure has started.

Now let's see if after 18 years I can find some trades for this week :)

With a prior week shortened by the holidays and no COT data, it won't be easy. But there are two trends which worth watching. Those are the uptrends in Soybean Oil and Cotton. I will wait for complex signals (Piece #M8) for being long in those markets.


Another grain market which is worth mentioning this week is Corn. Here I'll be looking for a short-term sell. Look at the chart below.

Corn analysis 01/05/2020

There was a straight-up move at the beginning of December. After that Corn remained in a range. What's important is that Corn had a hard time trying to break above 390 (blue dotted line). Few times the price went above that level but failed to close there. Until, on the first trading day of this year, it finally made a higher close. 

If you are a frequent reader of this blog, you know that I don't trust moves that happen one day before and one day after the holidays. I think the same situation is here, and that was a fake move. Especially with the immediate reversal on the next day (Friday). 

The seasonal indicator (blue line, courtesy of Larry Williams) shows a short-term opportunity to the downside. On Balance Volume is doing the same as the price which is good for a short-term trade.

So where's the target? I think it can reach the zone of the unfilled gap 383 2/8 – 381. But this is a problem. The stop-loss should be above 392. This means that the price is now exactly in the middle between stop and target. That is roughly 1:1 risk-reward. Lower, if the market opens with a gap or if we don't take as a target the farthest end of the gap zone. 

Having in mind that Friday's range was the largest we saw in two weeks I think the wisest thing here would be to wait for a few small ranges. Maybe one or two inside bars. Then, if on a higher level a short signal appears I am planning to take it. That will also improve the risk-reward ratio.

US Stock Market

The target for S&P500 for this year according to many, supposed to be reliable sources is 3500. Since there is no recession in sight we may see that level.

In the short-term, the situation is not that clear. The conflict between USA and Iran, the continuation of the decline in Manufacturing ISM and the seasonally weak month of January are against the immediate continuation of the uptrend.

The price action from the past week might be ignored because of the holidays. I will favour the long side again but with Dow. If I see a long signal in Dow, I will take it. If there is a short signal, I'll look to take it in Russell 2000. Spread trade between those two is not out of the question but this is something I can't foresee.

Most probably Monday will begin with a down move towards Friday's lows in all indices. Let's see how the market will behave during that downturn.

Now, let's find your missing piece!

Vassil Banov,
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

TAGS: S&P500, SPY, SPX, COT, Commitments of Traders, Down Jones, Corn, Soybean Oil, Cotton, Price Action Trading