The price of corn has been steadily rising with the price of oil, however the past couple days it has just been in somewhat of a free fall. I've been surfing all over the interwebs for an explanation and cannot find one. Does anyone know why?
Demand fears due to oil costs, apparently: http://www.bloomberg.com/news/2011-...ead-gold-rises-to-record-on-libya-unrest.html
I bought UNG quite some tim ago. Today this happened: http://biz.yahoo.com/e/110309/ung8-k.html So now, the worth has basically doubled. Is now the time to go ahead and get out?
A reverse split doesn't double the worth. Each share is worth twice as much, but you now have half the shares. It has no impact on the value of what you own. UNG is a failed security in that it suffers from contango. Every month, it has to sell its current futures contracts and buy longer dated ones; since the longer dated ones are almost always more expensive than the near-dated ones, it loses value each month. Essentially, if the price of natural gas stays flat, you're almost definitely going to lose money owning UNG over a long period of time. Just want to make sure you know that - if natgas spikes, you'll definitely make a profit, but if you compare a chart of UNG and NatGas, UNG isn't holding up.
price does not affect demand the only thing i remember from economics, the demand is there, it just doesn't support the price
Is tradeking wrong in telling me that I made a gain then? I know a split essentially means that you now have half the shares, but the same value. Is tradeking just slow in realizing this adjustment?
Yeah - sometimes the sites don't always process splits properly in terms of gains/losses during the day. But the actual value of your UNG in the account won't have changed.
USO and UNG are some of the worst vehicles to hold long term. If you want to invest in oil and gas do what I do. Man up and take delivery on that **** and store it in the backyard.
Free fall? Really? Come on. There is no explanation needed, it is just normal backing and filling. As long as the dollar maintains its current trajectory towards 0, all these commodities will rise just like in the 70s. From gold to oil to the softies. The real smart guys like Rogers called all this from the start. Their timing might not have been the greatest, but they are well capitalized enough to start averaging in from a few years ago. Way before CNBC tries to rationalize it with their "news". You want to see a real free fall you will have to wait awhile. When your best friends sister's uncle starts calling about tips on buying gold, and when that stuff is going up $100 a day with people waiting in lines for it, that's when you will have your free fall.
Corn appears to be in a plateau - holding stage with the normal backing and filling as noted by <i>CXbby</i> and that is somewhat in line with the Seasonal pattern. Here is a link to some Seasonal charts for various Futures. Seasonal Charts This chart looks similar with a description of the Seasonal Cycle for Corn. Corn Seasonal
First of all trading gaps haven't been that profitable since there haven't been that many. Second, trading gaps haven't been that profitable because of a general lack of public in the markets to chase it up/down. This has caused daytrading in general to not be that profitable, no matter the strategy. With that said, here are some of the ways I have traded it. I'll try to make it simple and brief. ____________________________________________ 1. The Fade. Simply put you short an up opening and buy a down open. You do this with the ES(S&P) or NQ(nasdaq100). That is the definition of a fade, you are going the opposite way of the gap. This does NOT mean you buy EVERY down opening and short EVERY up open. Here are a few rules and tips: a. Only fade gaps larger than ~4 points on ES and ~8 points on NQ. b. We are only looking for the first move lasting no longer than 10 minutes. c. Use a 3 point stop loss if you are a beginner. Eyeball it with more experience. d. Depending on where it gaps to, take profits early, and get out of everything when the gap is filled. If the gap is big it might not get filled, so keep in mind your 10 minutes. Now most importantly, what do we look for? Like I said, don't short every up open or buy every down open. What we are looking for are two things, follow through OR exhaustion. Follow through- If the previous day was a huge up day, and we are gapping down at the open today, buying that gap down is a GOOD fade. We are looking for residual buyers that were left in the dirt in the prior day biting at the bit to jump on. Vice versa for a gap up following a huge down day prior. We are looking to smack it back down. Although we call this the fade, it is really a momentum play. The prior day's momentum carrying through. Exhaustion- after a succession of up/down days, with the market clearly trending one direction, we have a big gap IN that direction. Normal backing and filling is healthy market action. However when it gaps up big AFTER already trending up strongly, it is a sign of exuberance. That is something we would like to fade. The opposite when we are down days and proceed to gap down big, it is a sign of capitulation, something we would like to buy. I use the 40 day rule for both. Short when gapping to a 40 day high, and buying when gap to a 40 day low. Follow the leader- No matter which way you are playing the gap, either from follow through or exhaustion, sometimes the gap itself is not good enough reason to trade it. Look for relative strength between the ES and NQ as a guide. Remember, tech/NQ is always the leader. This means you almost always want to be following in NQ's footsteps. For example, if you are looking to buy a gap down, and NQ is acting significantly stronger than ES, there is probably a good chance your fade will work. If you are looking to buy a gap down, and the NQ is weak as ****, I would probably hold off. Same for shorting gap ups. This only provides you an extra clue. Many times there will be no difference in ES and NQ, which means you're on your own pal. ___________________________________________ 2. The Blitz This is a strategy that attempts to front run the hedge fund/mutual funds who are slow as molasses compared to a nimble trader. Not their fault, they just have to move a lot more money. Many funds have to keep a certain % of their assets in stocks, at all times. This means when the market opens down 200 points tomorrow, they are left holding their **** because they are not allowed to liquidate. However, they ARE allowed to reallocate to hedge their bets. And they would be reallocating from what to what? Since they can't sell outright, then the next best thing is to get "safe". This means on a big down day they will swap their stocks in economically sensitive sectors to ones that are not. On big up open they do the opposite, go from safety to risk. To front run them, we use the OPG order type(Opening-Order) to get filled at the opening price in those stocks, before they can get in. The rule here is the market must be up/down at least 0.5% to use this strategy. Recently with how dead the market has been, I'd change that to +/-1%. On a big up open you want to buy risk and short safety, on a big down open you want to do the opposite: Risk- tech, semis, steel, industrials, casinos, solars etc Safety- consumer non-cyclicals(think WMT, MMM, CL, CLX, PG etc), food, drugs, tobacco, gold(only when it is gapping the same direction as the market) Banks and oils usually have a mind of their own so I leave those guys alone. OPGs are limit orders so you want to send your buys a little under the market and shorts a little above the market, or according to the stock's beta. For example If the market is up 1% I will buy the risk stocks up 0.75% and short the safe stocks up 1.25%. Certain stocks have betas way out of whack compared to the market so adjust accordingly. The goal is to get filled in a fair amount of both risk and safety, both long and short, so that you are somewhat hedged. Around 20-40 total stocks. You can't really have a stop on these since 1) there are too many 2) the market is too illiquid at the open. This is why having both sides is important. You are not worried where the market is going, up or down. Just your stocks. The risk stocks should be going the same direction as the gap, while the safety stocks should be fading it. As for your exit I usually get out of everything within 5 minutes, 15 minutes max. ______________________________________________ That's it. Those are the only Gap plays I know. Good luck. EDIT: Disclaimer Trade at your own risk. I am only trying to help. If you lose your shirt don't come looking for me.
Wow. Thank you so much for this info. I'm just starting managing my own money and trading so I don't know much. Furthermore, I usually trade on European markets and in French, so i'm not really familiar with some English terms. What do you mean by "big up open" and "big down open"? Thanks!
A big up/down opening as defined for that particular setup is a gap open up/down 1% from the previous day's close. Remember everything I am talking about are all for professional short term trading only. I would not recommend any of this stuff for investors. If you are a novice regarding the markets I definitely would not recommend trying any of it to start off. I don't want anyone getting hurt. Either paper trade it with fake money to test it and learn or familiarize yourself with the market first. Mango has provided numerous links for trading education throughout this thread. I've also started some threads on the subject if you can search for them. I have abandoned them since because as you can see it is quite a bit of work to keep up.
I'll use this stock as an example of some of the things I look at for longer term trading. This is not for short term day traders. It isn't for investors either. It is medium-long term swing trading using technical analysis. Remember, don't focus so much on the specific example I am about to use but more on the methodology. I like to look at setups from a Top Down perspective. It refers to different timeframes I look at, from monthly, weekly, daily on down. We start from the higher timeframes. The stock we are looking at is APOL. Weekly: I define overbought and oversold with bollinger bands and stochastics. Since topping out in early 2009, APOL has reversed every time it has gotten to it's upper bands on the weekly chart. These tops have all coincided with a overbought reading on the stochastics as well. We are currently at overbought on both. Daily: Using the 4/22/10-11/29/10 down leg on the daily chart to draw our fibonacci retracement, we can project several price levels as potential resistances. One of these levels is the 38% retracement at about 46.19. Remember that number. Zooming in on our daily chart, we can now draw another fibonacci retracement using the more recent 10/01/10-11/29/10 leg. Using this leg we get a whole new set of price levels as potential resistances. Remember the rule for fibonacci levels, the rule of 62, the golden ration of 61.8% which is the most crucial retracement. And what is the 61.8% retracement of this particular leg? 46. That is very close to the retracement level we got from a completely different leg. We call this a convergence. Price convergences make powerful support/resistances, and are much more relevant than just a singular level. Using the two separate legs on the daily chart we have our potential target as a resistance, 46-46.19, and that is where the stock has stalled. But price alone often times is not enough. Looking at the most recent pivots in the stock, we have the final piece to our puzzle. While the price of the stock has made a higher high compared to its previous high(blue line), the stochastics has made a lower high(red line). While I use stochastics as a measure of overbought/oversold, at its core it is a measure of momentum. What this tells us is that while the price has broken higher, the momentum has actually waned. We call this a divergence. In this case a negative one. Now let's start from the top. From a Top-Down perspective. We have our condition on the highest timeframe we are looking at, weekly, as overbought due to the bollingerbands and stochastics. We have a convergence of prices around 46 looking at the next timeframe down, the daily. Finally, looking at the last few weeks, we have our final clue of the stock weakening in the form of a negative divergence on stochastics. Put that all together and it is a Short setup from 46. I have a target measured to below 30. Setups like this do not grow on trees. You have to weed through hundreds of charts just to find a few that line up. Once you find them this is all the work you have to put in to analyze it and plan out your approach. After all the work is done, you can finally execute. And then, there are still NO guarantee that it will actually work. I have no idea if APOL will actually go to 30. It might turn around today and head straight up. That's what a stop is for. But through my work and analysis I know that I have an edge. Whether this particular setup works out or not doesn't matter, because it is one of 100 and over time I should come out ahead. That is trading.
It would be the change - difference between the Close of the previous day ( regular retail trading hours) to the Open (regular retail trading hours) of the current day. Without a basket of actively traded stocks for the U.S. Index futures to take a cue - signal from, the overnight prices for the U.S. Index futures sometimes <i>wander</i> a bit.
Today is a perfect example of why you don't buy every gap down or short every gap up for the fade. We have gone no where the past two weeks, trading in a range. There is nothing to follow through as there has been no short term trend. Meanwhile there is definitely no exhaustion since we haven't gone anywhere. If we gap today, like we have, especially opening outside the range, it is much more likely a breakout/down. Which would make an incredibly dangerous fade.
good time for a bump... fed day tomorrow and nikkei is down 14% right now on the breach fears. i made a misstep trying to sell some volatility on these march options that expire this week. however, i will be looking to get long on panic sell offs in the morning.
