Corn’s impressive rally on yesterday’s news that farmers will plant 4% less than last year (91.7 million acres) propelled prices to within 15 cents of our first upside objective of $5.30 per bushel in the July futures contract. The options we suggested purchasing for 15 cents ($750) or less back in late January (Alert #3) are just pennies away from our target. If you followed our suggestion to exit half of your calls at twice initial entry level or higher in early March (Alert #7), you are holding the rest with “house” money.
Late planting forced by a lingering winter and the possibility of a wetter and/or colder-than-normal spring could be additional bullish factors with the potential to push prices even higher.
Since we don’t know what Mother Nature has in store, we are suggesting two alternative ways to manage our existing bullish positions: 1) continue to hold your calls and move your risk point up to yesterday’s low of $4.80 per bushel or 2) exit all of your existing positions and use roughly 1/3 the proceeds to establish new bullish positions with a total cost and risk of approximately $750 (plus transaction costs) and a gross potential of $3,500 should the yellow grain hit our second target of $6.00 per bushel. “Option 2” allows you to take more cash off the table while maintaining a bullish bias.
Prices can and do change so RMB trading customers should contact their broker directly for further specifics on this trade. Your broker can also help you custom design a strategy based on your risk level and/or differing price targets.
Bullish Breakout in the Aussie?
Will the budding breakout in the Australian dollar hold up or will it disappoint like gold? It is still too early to tell. What it does allow us to do is move our risk point up. We are now using two consecutively lower closes below .8940 in the June contract as our signal to exit and cut losses on the long calls we suggested purchasing last week in Alert #13. Our target remains 97 cents in the June contract.
Is the Gold Bull Broken?
Not necessarily… Before we throw in the towel on our bull spreads in gold, let’s take a look at the price chart. While gold’s breakdown following its false breakout has certainly been disheartening, the market hasn’t given us conclusive evidence that the party is over. In fact, the mini-bull that began on the first day of 2014 is behaving much like many bull markets, taking 2 steps forward and one step back.
Gold has retraced a little over 50% of its up-move and could fall a bit further without totally killing momentum. 61.8% retracements are common in all markets. $1,265 would represent a 61.8% retracement from the early March high. Our risk point remains two consecutively lower closes below $1,233 in the June futures contract. The yellow metal is rapidly becoming oversold. With April contract now in the delivery period, it also vulnerable to short squeezes.
If you are not an RMB Trading Customer and want to know more about how we are playing this or any other market, contact us or give us a call at 800-345-7026 (toll free) or 312-373-4970 (direct) and we’d be happy to go over some of our fixed- risk, “Big Move” strategies with you. You can also e-mail firstname.lastname@example.org. Put “Aussie” in the subject line.