Today in Commodities: Day-Trading

I have been accused of being a day trader and I’m curious to see what others think. My logic is, if I can take profits quickly for clients and be in cash more often, is that a bad thing? Leverage is a double-edged sword, but if one can navigate the markets and use small incremental moves to profit, is that wrong? The pit is closed though there is still trading on the screen.

Crude looks to close down by about 50 cents just below $75 on the March contract. We’ve yet to commit clients' funds via futures but we’ve suggested buying May $78/85 call spreads. Stochastics on the daily chart are reading oversold and assuming we get a turn higher from around these levels, we think a move back above $80 is likely. At this moment natural gas is down 4.5% near today’s lows, we feel there is still more downside but at least prices are moving in the right direction. We’ve been consistent wanting to stay away until we get a trade closer to $5/BTU.

We would like to see more of a rally to sell Indices (ES and SP); that will be determined by the Fed tomorrow. At the moment we have NO Index exposure with clients.

Clients were advised to take off their May calls in sugar at a profit, again we traded over 30 cents on the front month but I smell a correction. Ideally we get a near term correction back near 27 cents in March. That level should get a profit in the calendar spreads (short March/long July) and be a decent entry to re-establish bullish plays. Clients were advised to put in gtc profit orders on the recently purchased May OJ; it would probably take another 5 cent increase in futures to get filled. We most likely will not take the signal because the lack of liquidity but shorting lumber with stops above the recent highs looks to be a good risk/reward trade.

Intra-day silver was at a 3 month low trading just below the 100 day moving average but traders defended this level as March closed almost 50 cents off its lows. We suggest scaling into long futures if today’s lows hold. Additionally clients bought more May $2 call spreads today. As for gold the 50 day moving average seems to be the line in the sand at $1084 in the February contract. Traders could scale long futures with stops right below that level, or our suggestion would be purchasing June call spreads.

We are continuing to accumulate bullish corn positions with clients via options and futures. Today they were buyers of May $4 calls. Furthermore for traders holding large positions long December futures we suggest putting in sell stops just below the lows in March to weather a near-term correction. Ideally you would not get filled but to mitigate the risk you could implement this strategy.

We lifted the Pound futures from yesterday for clients at a $400 profit/per. Considering margins this is 15% in a day trade! We do not think the dollar has much left but reserve the right to change our mind at 2:15 tomorrow depending on what Uncle Ben has to say. Most of the crosses have hit our near term objectives so we would let the dust settle for a few sessions.

Lean hogs got slaughtered today down 2.5%; take profits on your April puts and trail stop loss on futures to just above 70 cents. Continue to hold your live cattle puts; prices were down 1% today, we feel there is more.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.

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