Soybeans Finally Take A Breath

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After ten sessions, soybeans finally closed down. I was expecting it and indeed have been waiting for the past three days for it to happen. It seemed very likely that it would need to take a breath, having risen 4% this week alone. With nothing new today to help the bulls push forward and the combines starting to roll out with good weather for the harvest in the US, it was only surprising to me that more profit-taking hadn’t happened earlier in the week. I guess I have China to thank for that. Clearly the market believes it is currently overbought. Now, to wait for next week to see if this breath becomes a breather.

Corn again seems to be of most interest having closed up once again. I suppose when you’ve potentially got the biggest crop since the 1940s, and the reports have been good so far, but the price is still going up, that’s one hell of a surprise and hence big news. Wheat only drew a few wistful sighs from me today as it touched limit-up once again and closed up 24 cents. *sigh*

As my account is now a little healthier, I will be looking for other potential positions over the weekend. It certainly feels like I’ve missed the boat on several opportunities over the last four weeks. It will need some careful consideration, to be covered in my very first WRAP UP.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long -10.00

Account Details

Account Balance: €271.48
Open Position P/L: €460.00
Account Position: €731.48
Overall P/L: -€1318.52
   

Soybeans Ease the Pain

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Corn seems to be grabbing the bigger headlines today, but for me soybeans continue to play up a storm. Now into it’s tenth successive positive close, soybeans continued to make fresh three year highs, reaching 996’4 early in the session. The USDA‘s weekly exports figure came in comfortably at the higher end of expectations at 513,600 metric tons. It was also reported over night that China will be lowering import duties to help combat hyper-inflation. This news was seen as more important for corn with China obviously needing more for food consumption than they are producing this year, but it was also seen as positive with China being the largest importer of soybeans. Both of these no doubt were the major bullish factors on today’s movements in soybeans.With the November 2007 contract within a whisker of $10 and the following three contracts already above the $10 mark, can this week end by breaking through this resistance point? I doubt it. It may reach the $10 during the session but with the usual closing of positions and weekend hedging, I’m expecting it to do no more than consolidate around or lower than today’s closing price.

Today however marks an important psychological milestone for me as my account finally reaches back over €750. This signifies the last of the lump sums that I deposited into my account several weeks ago. I was hugely over stretched at the time and followed it with more foolish behaviour that eventually with one mistake lost me a huge chunk of my capital. Since then, with my capital so low I was forced to cut right back on my positions and as a consequence missed out on the major movement in wheat recently. That lesson has been hard won, but I believe well learned at this stage. My open position profit also made it over €500, another nice number to reach. Of course, I realise that these are not concrete figures nor that they in fact mean much, but since so much of trading is psychological, it remains important to me. It also means that I have a new goal in mind and as such is a step forward.

I’ll leave you with an excerpt from a short article by Nico Isaac, introducing two publications (Monthly Futures Junctures and Daily Futures Junctures) that provide analysis on commodity markets.

Sorting Soybeans: The media reports are more “mixed” than a bag of beans: “US soybean harvest forecast to be smaller than last years.” — VERSUS — “Soybean acres could be on increase next year.” And, “Soybean harvest faces another threat: freeze damage.” — VERSUS — “There are no specific harvest concerns at this time.”

The September 18 Daily Futures Junctures has ONE clear message: “I believe this is a market to watch this week.”

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +18.38

Account Details

Account Balance: €271.48
Open Position P/L: €503.52
Account Position: €775.00
Overall P/L: -€1275.00
   

Expected Consolidation, Unexpectedly Postive

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Soybeans finished with another gain for a ninth session. I found that surprising, expecting a consolidation more on the negative side than on the positive side. All the more so with wheat finishing down 24.1 for the day, having earlier reached limit down. From the various and varied opinions of analysts, it appears that the support for soybeans is coming from underlying bullish fundamentals. In the shorter term, weather continues to be the major factor, with dry weather in Brazil delaying the planting of next years crop and the continuing idea that hot weather in August has damaged the current crop. This presumably is coming from bad reports from early harvesters. As one farmer from Illinois put it, “On August 1 I thought we had great potential, now it appears that we will have the worst bean crop in 20+ years.”I am always wary of reading too much into the crop comments at AgWeb, however it appears quite possible that the harvest will be as disappointing as the market currently believes it will be. More interesting to me though is the idea that if the harvest is bad, soybeans will still not be as tempting for farmers at their current price level. Soybeans will have to go much higher to make it interesting and worthwhile for farmers who will be thinking that next years crop could be just as low. This makes wheat and corn the safer bet in their eyes. This hadn’t occurred to me previously. This is one of the reasons why I read AgWeb most days. It gives me an insight on what the farmer’s viewpoint and I find that fascinating.

Tomorrow, the USDA will be releasing their weekly export sales. I personally believe it needs to be reasonably high within the expected range of 300,000 to 500,000 metric tons for the price to continue on its move upwards. Last week, it came in at the lower end at 346,500 metric tons. Then again, what do I know, the market will do what the market always does, it sets the price despite whatever I think. I find that reassuring in some ways.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +1.75

Account Details

Account Balance: €271.48
Open Position P/L: €431.00
Account Position: €702.48
Overall P/L: -€1347.52
   

Solid but Quiet for Soybeans

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Soybeans traded in the same range as yesterday. It looks to me like another day of consolidation. Opening at its highest at 974.0, it was unable to break through yesterday’s new contract high of 974.4. In the end, a quiet day.Wheat closed down 6.0. I will be interested to see how this market changes over the next few days having now reached what appears to be a plateau. My interest in wheat lies in the fact that up until the end of August, I had a long position which I was unable to roll-over due to lack of funds. So I just missed out on the recent surge in prices, a fact that continues to grieve me. Wheat should also be providing some support for Soybeans as part of the upcoming bidding war for next years plantings.

Open Positions

Asset Contract Position Change
Soybeans November 2007 Long +1.0

Account Details

Account Balance: €271.48
Open Position P/L: €421.52
Account Position: €693.00
Overall P/L: -€1357.00
   

Trading on Thin Ice

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Let me get one thing straight, right from the start.

I am not a trader!

By that I mean, I have had no education, no experience and up until recently no interest in the area of trading. The last time I learned anything even remotely related was when I was studying Business in secondary school almost ten years ago. I do hope that I will become a trader; that over the coming period of months and possibly years, as I learn more and gain more experience that I can start to make a reasonable claim on the designation of trader. Until that day, I will probably always think of myself as trading on thin ice.

Thin ice is just a concept to me. I have only ever experienced one serious snowfall in my life and that was before the age of five. No doubt, the huge snowdrifts that I remember myself plowing through were just a couple of inches deep. Since then, there has never been a serious snow in Ireland to my memory and I don’t believe I have ever seen a lake that has frozen over. The only ice skating that I have done has been on an artificial rink. As such, thin ice as a physical reality remains elusive. Still the picture of a warning sign and the sound of cracking ice comes easily to the imagination.

In the same way, up until April of this year, trading or investing in any kind of market was merely a faint idea in my mind. Investing was shrouded in mystery. I didn’t really understand it and I had never owned any stocks or looked into how I could buy some. The only images I had of markets were those of the movies, Eddie Murphy and Dan Aykroyd in Trading Places Trading Placesor Ferris Bueller mimicking the actions of traders in the pits of Chicago. The closest I had come to any experience of the markets in my own life was through my family; my father who has a few shares in some financial institutions and occasionally gets some dividends and a cousin who was given some shares as a birthday gift.

Then again, it’s not as if I had ever been interested, I always figured investing was for people who had money and I didn’t have any. Just out of college in 2004, I worked for a year before going travelling in New Zealand for the best part of another year. When I came back, I got another job and then the future suddenly loomed ahead. I remember, in December of 2006, looking at both Apple (NASDAQ:APPL) and Nintendo (OTC:NTDOY) and wanting to buy shares in both. Looking at their charts today, I note that they both would have been good buys. Nintendo always seemed like a no-brainer to me, the Wii to my mind was going to be huge. Too bad, I still didn’t have any money at the time.

Roll on a few more months and a new job with better money. It’s a Friday and I’m at home, somehow I’m watching the Late Late Show. It’s an institution in Ireland, a talk show and I never watch it. I must have caught some part of the interview whilst flicking, maybe it was the name that was familiar or something that was said; Mark Shipman is talking about his book, “The Next Big Investment Boom.”Mark Shipman I watched the interview, found it interesting and decided I’d get the book. I wasn’t the only one. Bookshops around Dublin were caught by surprise and only had a few copies in stock that were quickly bought up. You could say, that all that has happened since and will continue for the foreseeable future can be laid at the feet of Mark Shipman.

My local bookstore got new copies the following week and I read it all within a day or two. I was hooked. I found myself in a new world of possibilities and knowledge. Over the next month, I would voraciously read the following books, “Trend Following” by Michael Covel, “Hot Commodities” by Jim Rogers and “The New Market Wizards” by Jack D. Schwager. I got my finances in order, consolidating my bank accounts; opening new accounts with better products and closing my old ones that were no longer competitive. If I only got one good thing from Shipman’s book, it is that my finances are now much better organised. He also pointed the way to financial spread betting.

This is an important point in my story, as without spread betting, I would not have the capital to be involved in the markets. Add to that the prohibitive transaction costs and government taxes and it would not have been worth my while to delve any deeper into this new world. Luckily, financial spread betting does exist with multiple firms available in Ireland. By the 24th of May, my bank accounts were in order, I had gathered my inital stake and I applied for an account at WorldSpreads. Two weeks later, I had entered my first positions and lost 50% of my capital.

This is another reason why I am trading on thin ice.