Chicago December wheat still has a sizable short position with managed futures. This goes hand in hand with a large short position in December Corn and an equally large long position in new crop Soybeans.
That being said, there are some trades setting up in the grains which should give good risk/reward parameters.
1) Sell Wheat against its 1-year old Bear Trend-line. Look below:
Finally, in the Beans. Above is a daily chart of January beans. Jan beans are replacing November as the Top Step / most liquid trade with the most volume on the board. Because of that I’m looking at that contract for the next several months. We have a really good support trend-line below here at $12.75. We are butting up against resistance here at 13.05, however currently. We are waiting on USDA info for exports as well as the November crop production number. Upside target on really good up move takes us from 13.00 up to 13.80. That would be a good 80 cent rally that the funds would most likely use to liquidate a portion of their massive long position. Conversely, If 12.62 failed, you would have a lot of longs wrong. That could get ugly for anyone stuck long without some sort of option hedge below their futures position.
Trading against these long term trend-lines gives us 1) a reason for trade entry 2) a target and 3) a line in the sand which we can use for trade entry and exit. These trend lines are key because both bulls and bears look at them and use them to justify their opinions. They give you a good chance to enter a trade with a defined risk/reward, which is something I always try to establish.
CER