Hello and welcome back to CRI's CTS Spotlight Blog.
Since I had the time this week, and I see some startling opportunities out there in the market, I thought I would post my thoughts on the 'softs' market in general and point out two intersting opportunities developing within the sector.
So here is my CTS summary for the week of August 3rd, 2012:
08/03/12: After a
week's hiatus, we are back in the saddle! In what appears to be a
rather normal bounce (coming out of the seasonal trough of late
spring/early summer) commodity prices in general are moving higher. ECB
help from Europe, better employment data from North America and
stabilization from Asia all seem to be supporting the idea of higher,
not lower prices going forward. Some rather aggressively (grains),
others mid stream (energies) while others seem to be just getting
started (softs). Indeed, Softs got hit very hard through the correction
and look to be offering some very interesting risk/reward potentials
here. For more on that please refer to this weeks WTCS blog post.
Specifically, I am refering to Orange Juice and Cotton as outlined in the chart and associated tables below:
Both of these markets have yet to respond to the broader market bottom of late. While I am not an outright bull on either market yet, it is interesting to see the 'OTE' trade idea at work (In short, taking a position at or near a 70.5% retracement of the consolidation range and risking a break of the significant range pivot). You can see how OTE suggested getting long cocoa several trading sessions ago and now we seem to have a working uptrend there. Can either OJ or Cotton do the same? At these risk levels (Cotton: .65 risk for 45.00 potential reward!!!!!! & OJ: $8.50 risk for $32.00 potential reward) is it not at least prudent to consider the trade. From a fundamental perspective, either one good 'hurricane fear' or a little of the grain misery passed on to cotton growers and either one of these markets could spike back to their respective 50% levels and most probably back to filling in their rather weekly price gaps.
That's all for this issue of the CTS Spotlight,
Brian Beamish FCSI
the_rational_investor@yahoo.com
the_rational_investor@yahoo.com
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