The two dueling trend lines played out reasonably well. Tomorrow its any one’s guess where SF14 heads. After a 25 cent cleanse in the past 72 hours, a lot of the folks who sold looking for the breakout below the support trend line, have now left blood on the field with this rally. Now we are at the intersection of another trend line. We spiked from 88 to 92 1/2 in the last 30 seconds of trade. Felt more like shorts throwing in the towel than new longs adding to positions.
If you want to play the break-out, you best trade small and use wider stops. Tomorrow is December options expiration.
We’ve seen CZ13 rally from the 4.10 print all the way up to 4.25. There are about 125K corn options between the $4.00 strike and the $4.25 strike. There are another 37K at the 4.30 level. That’s 625 million bushel which are going to lose their down side protection tomorrow at 1:15 PM. Those guys who sold those puts do not want to write that check. No wonder futures have rallied in the past 4 days just enough to make all those puts worthless.
This is like a snake that swallows an animal. The bulge has to be digested somehow.
Because of that reason, I’d be very very careful trading tomorrow.
Probably a good day to sit on your hands and watch.
Use tonight and tomorrow morning to get flat, unless you have a very large winner and are willing to roll the dice. Literally, anything can happen to morrow. That’s an over used expression, but one that I think applies for tomorrow.
CER