THE JOSS REPORT - WEEKLY TRADE ADVISOR

TECH TALK BY Scott R. Joss (Non member C.T.A)*

MAY SOYBEANS (S6K) – MAY SOYBEAN OIL (BO6K)

Last week, I began developing several 'trading modules' for May Soybeans because of a potential monthly recommendation for March, which was not confirmed until the close of business February 28.

May Soybeans have a monthly recommendation for March: buy when trades 617.25 – sell when trades 580.75.

This product is for aggressive traders only.

The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest for futures last week decreased by -24,817, posting a total open interest of 351,265 contracts. 

Traders are not to exceed the rule of thumb - 10% of equity to risk ratio.

The proposed monthly trade risk is $1,825, which suggests traders should have an account size of $18,250 per contract to trade this product.

If you do not fit this risk profile, traders are advised to consult their account executive for an option trading strategy.

WHAT DOES THE MAY SOYBEAN CHART LOOK LIKE?

May Soybeans have been in a five-month price decline that began from highs of 741.00 (6/24/05) to lows of 559.50 (11/28/05).

Recently, May Soybeans have traded from lows of 559.00 to highs of 643.00 (1/04/06) before reversing and posting recent lows of 572.50 (1/18/06).

Currently, May Soybeans have been in congestion between lows of 583.00 and highs of 617.00.

May Soybeans may have possibly posted a mini ‘spread double bottom’ at the 583.00 level.

May Soybeans have multiple unfilled price gaps above the current market price. The most recent unfilled price gap is between 617.00 and 620.00. 

May Soybeans have several unfilled price gaps below the current market price. The most recent unfilled price gap is between 559.50 and 555.00.

May Soybeans have closed above its 40-day moving average and 50-day moving average - which as of Friday was at was at 595.00 and 602.00, respectively.

May Soybeans closed Friday at 606.00 - which is above its 100-day moving average of 598.75 and below its 200-day moving average of 624.25.

Traders need to be aware that Soybean Oil prices have been advancing. However, Soybean Meal posted a monthly sell signal at 177.90 two weeks ago. It has been my experience that Soybean Oil prices and Soybean prices may advance just so far - but without Soybean Meal prices moving higher, any price advance may not be sustainable. So we need to watch May Soybean Meal to give us a clue to direction and momentum. 

May Soybean Oil had a weekly recommendation for last week: buy when trades 23.63 – sell when trades 22.95.

On 2/28/06, May Soybean Oil posted a weekly buy signal at 23.63.

May Soybean Oil has a very bullish ‘W’ formation and must maintain a foothold on a weekly and monthly basis above 23.99. If this were to occur, May Bean Oil has a price objective of 26.63.

The ‘Commitment of Traders’ report for Soybean Oil - published each Friday by the CFTC - indicated the net change in open interest for futures last week decreased by -3,817, posting a total open interest of 178,978 contracts. 

On March 10 the USDA Crop Production and Supply/Demand report is due out at 7:30 am C.S.T. Also, on March 31 the all-important USDA grain stock and planting intention report is due out at 7:30 am C.S.T.

This may be a long yet rewarding month for the grains.

WHAT WERE TRADERS ADVISED LAST WEEK?

http://www.cleartrade.com/images/letter_2_26_06

WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?

For March, May Soybeans have a Monthly recommendation: buy when trades 617.25 – sell when trades 580.75.

For Monday, May Soybeans have a daily recommendation: buy when trades 607.25 – sell when trades 598.25.

Below are possible ‘trading modules’ for futures traders to consider next week:

# 1) If May Soybeans first posts a higher high than last week’s high of 607.50:

Very Aggressive traders are advised to establish a long position, placing stops at 580.75.

# 2) If May Soybeans post the monthly buy recommendation at 617.25:

Aggressive traders are advised to add to their existing long position or establish a long position, placing all stops at 580.25.

Option traders are advised to purchase May 620 calls or July 720 calls, risking 70% of purchased price**.

# 3) If May Soybeans posts a close above 626.00:

Aggressive traders are advised to add to their existing long position or establish a long position, placing stops for this position below 607.50*.

Option traders are advised to purchase May 620 calls or July 720 calls, risking 70% of purchased price.

# 4) If May Soybeans posts a close above 631.00:

Aggressive traders are advised to add to their existing long position or establish a long position, placing stops for this position below 617.25*.

Option traders are advised to purchase May 620 calls or July 720 calls, risking 70% of purchased price.

Our first objective will be a challenge of recent highs at 643.00 (1/04/06).

# 5) If May Soybeans posts multiple closes (4 business days) above 643.00:

Aggressive traders are advised to wait for a close above 653.00 before adding to their existing long position, or establish a long position.

If May Soybeans posts multiple closes above 643.00 and posts a close above 653.00, aggressive traders are advised to move all stops below 617.25*.

# 6) If May Soybeans first posts a lower low than last week’s low and last month’s low of 581.00:

Aggressive traders are advised to establish a short position, placing stops above 607.50*.

Option traders are advised to purchase May 580 puts or July 560 puts, risking 70% of purchased price.

# 7) If May Soybeans posts a close below 576.50:

Aggressive traders are advised to wait for multiple closes below 572.50 before adding to their existing short position, or establish a short position.

Option traders are advised to wait for multiple closes below 572.50 before purchasing puts.

# 8) If May Soybeans posts multiple closes below 572.50:

Aggressive traders are advised to add to their existing short position or establish a short position, placing stops for this position above 580.75.

Option traders are advised to purchase May 580 puts or July 560 puts, risking 70% of purchased price.

Our objective will be 545.00. 

Below are possible ‘weekly reversal’ trading modules to consider:

# 9) If May Soybeans first posts a higher high than last week’s high of 607.50 yet reverses, posting a lower weekly and monthly low of 581.00:

Aggressive traders are advised to establish a short position, placing stops above 607.50*.

Option traders are advised to purchase May 580 puts or July 560 puts, risking 70% of purchased price.

# 10) If May Soybeans first posts a lower weekly and monthly low of 581.00 yet reverses:

Aggressive traders are advised to place resting buy stop orders at 607.75 and 617.25 above the market.

If May Soybeans posts 607.75, traders would establish a long position, placing stops below 581.00*.

Option traders are advised to purchase May 620 calls or July 720 calls, risking 70% of purchased price**.

If May Soybeans posts 617.25, traders would add to their existing long position, placing stops below 581.00*.

Option traders are advised to purchase May 620 calls or July 720 calls, risking 70% of purchased price**.

I have compiled some option facts for traders:

Soybean options for a two-year ‘implied volatility’ average are ranked number 16 out of 45.

16) Soybeans (S) High 45.45% - Low 19.62% - Current 25.53%.

Soybean options for a one-year ‘implied volatility’ average are ranked number 25 out of 45.

25) Soybeans (S) High 45.45% - Low 20.21% - Current 25.53%.

Soybean options for a six-month ‘implied volatility’ average are ranked number 9 out of 46.

9) Soybeans (S) High 29.23% - Low 20.21% - Current 25.53%.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?S06K

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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?S

* (Futures traders and their account executives are advised to discuss this suggested stop).

** (Option traders and their account executives are advised to discuss the suggested risk). 

MAY SUGAR (SB6K)

Three weeks ago I began developing several 'trading modules' for May Sugar because of a weekly sell recommendation.

On 2/13/06, May Sugar posted a weekly sell signal at 17.64.

Remember - volatility is at extreme levels. Newly entered longs are looking for 25.00. Funds may have the all-important advantage on direction.

This product is for aggressive traders only.

The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest for futures last week decreased by -23,003, posting a total open interest of 464,326 contracts. 

Traders are not to exceed the rule of thumb - 10% of equity to risk ratio.

The proposed weekly trade risk was and still is $2,038.40, which suggests traders should have an account size of $20,380 per contract to trade this product.

If you do not fit this risk profile, traders are advised to consult their account executive for an option trading strategy.

WHAT DOES THE MAY SUGAR CHART LOOK LIKE?

May Sugar has been in an eight-month price advance that began from lows of 8.81 (6/15/05) to highs of 19.65 (2/03/06).

Until recently May Sugar had been in congestion between lows of 17.50 and highs of 19.65.

Sugar has posted multiple closes (4 business days) below 17.50, which confirms the weekly sell signal at 17.64.

As I stated last week, our long-term objective from sugar’s second bullish ‘W’ formation at 18.87 was met on 2/2/06.

May Sugar has multiple unfilled price gaps above the current market price. The most recent unfilled price gap is between 19.80 and 19.85. 

May Sugar has several unfilled price gaps below the current market price. The first unfilled price gap is between 16.00 and 16.10. The second unfilled price gap is between 15.34 and 15.43. 

May Sugar closed above its 40-day moving average and 50-day moving average - which as of Friday was at 17.20 and 16.67, respectively.

May Sugar’s close Friday was at 17.23 - which is above its 100-day moving average of 14.43 and its 200-day moving average of 12.08.

For three weeks it appears May Sugar has been developing a bearish ‘V’ top formation.

The downward ‘V’ trendline begins at highs of 19.65 through highs of 19.24 and if touched today would intersect at 18.17.

May Sugar may be forming a bearish ‘triple crown’ top.

The three key points of the potential crown top developing are at highs of 18.60 (1/23/06), 19.65 (2/3/06) and 18.68 (2/23/06).

If this developed into a bearish ‘triple crown.’ top, May Sugar would need multiple closes below recent lows of 16.72. However, the crown top would be suspect if May Sugar penetrated the 18.17 highs.

WHAT WERE TRADERS ADVISED TO DO TWO WEEKS AGO?

http://www.cleartrade.com/images/letter_2_26_06

WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?

Aggressive traders who established a short position at the weekly sell signal of 17.64 are advised to move stops above 18.17*.

Aggressive traders who added or established a short position at the ‘intra-day’ sell signal on 2/23/06 at 17.99 are advised to move stops above 18.17*.

Aggressive traders who added or established a short position on a lower low at 17.44 are advised to move stops above 18.17.

Below are possible ‘trading modules’ for futures traders to consider next week:

# 1) If May Sugar first posts a higher high than last week’s high of 17.78:

Traders are to prepare for a possible price advance.

Aggressive traders are advised to leave their stops as mentioned above.

# 2) If May Sugar posts multiple closes above 19.65 (4 business days):

Aggressive traders will have liquidated their short positions and are advised to establish a long position, placing stops below 18.70*.

Option traders are advised to purchase July 2100 calls, risking 70% of purchase price**.

# 3) If May Sugar posts multiple closes above 20.01 (4 business days):

Aggressive traders are advised to add to their established long position or establish a long position, placing all stops below 19.65*.

Option traders are advised to purchase July 2100 calls, risking 70% of purchase price**.

# 4) If May Sugar posts multiple closes above 21.40 (4 business days):

Aggressive traders are advised to add to their established long position or establish a long position, placing all stops below 19.99*.

Option traders are advised to purchase July 2200 calls, risking 70% of purchase price**.

Our intermediate-term objective will be an assault on the 50% retracement level at 24.14.

# 5) If May Sugar first posts a lower low than last week’s and last month’s low of 16.22:

Aggressive traders are advised to add to their established short position or establish a short position, placing stops for this position only above 17.78*.

Option traders are advised to purchase July 1600 puts risking 70% of purchase price**.

# 6) If May Sugar posts multiple closes below 15.98:

Aggressive traders are advised to add to their existing short position or establish a short position, placing all stops above 16.91*.

Option traders are advised to purchase July 1400 puts risking 70% of purchase price**.

# 7) If May Sugar posts multiple closes below 14.98:

Aggressive traders are to prepare for an all out assault on the 100-day moving average at 14.43.

Aggressive traders are advised to move all stops above 15.98*.

Below are possible reversal ‘trading modules’ to consider next week:

# 8) If May Sugar first posts a higher high than last week’s high of 17.78 yet reverses, posting a lower low than last week’s and last month’s low of 16.22:

Aggressive traders are advised to place resting sell stop orders at 16.21.

If May Sugar posted 16.21, aggressive traders are advised to place stops for this position above 18.17*.

# 9) If May Sugar first posts a lower low than last week’s and last month’s low of 16.22 yet reverses, posting a higher high than last week’s high of 17.78:

Aggressive futures traders and option traders are to prepare for a possible price advance.

Aggressive futures traders are advised to place resting buy stop and reverse orders at 19.66.

If May Sugar posted 19.66, aggressive traders will have exited their short positions and will have established a long position, placing stops at 17.44*.

I have compiled some Sugar option facts for traders:

Sugar options for a two-year ‘implied volatility’ average are ranked number 5 out of 45.

5) Sugar (SB) High 52.89% - Low 18.90% - Current 39.51%.

Sugar options for a one-year ‘implied volatility’ average are ranked number 6 out of 45.

6) Sugar (SB) High 52.89% - Low 18.90% - Current 39.51%.

Sugar options for a six-month ‘implied volatility’ average are ranked number 10 out of 45.

10) Sugar (SB) High 52.89% - Low 22.85% - Current 39.51%.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?SB06K

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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?SB

* (Futures traders and their account executives are advised to discuss this suggested stop).
** (Option traders and their account executives are advised to discuss the suggested risk).

MAY COTTON (CT6K)

I began developing several 'trading modules' for March Cotton in the 12/08/05 Joss Report because of two weekly buy recommendations. In addition, May Cotton had posted two weekly buy recommendations listed below.

On 12/12/05, May Cotton posted a weekly buy signal at 54.39.

On 1/20/06, May Cotton posted an 'intra-week' buy signal at 57.10.

Confirmation of an upside breakout for May Cotton would be a close above recent highs of 59.60 (10/13/05).

In the past two issues of the Joss Report I expressed concern of a further price advance because May Cotton had encountered stiff fund selling at 57.56, which is the 18-month moving average. I posed the question: Is Cotton ready for a major price advance - or will it fall victim to fund profit taking?

If May Cotton could not post multiple closes above 57.56 yet posted multiple closes below 55.70, a possible price failure might occur.

On 2/27/06, May Cotton posted a close below the 55.70.

Confirmation of a downside breakout would be multiple closes (4 business days) below 55.00.

Friday, May Cotton posted its third close below 55.70 and first close below 55.00.

This product is for aggressive traders only and as traders can see, this baby can really move.

Over the last four months I’ve made traders aware that subsidy cuts for Cotton had been agreed to by the U.S. at the Doha Round talks last year. The WTO had ruled against the U.S. subsidy and the completed text version deadline of how the cuts would be implemented is due by April 30. The 2002 farm bill, which funds farm subsidy programs, is set to expire in 2007 - but many farmers want Congress to keep it in place while negotiators pursue global trade talks at the World Trade Organization.    

Fundamentally, it has been reported that Texas Cotton and Corn growers may decide because of weather concerns to forgo planting Corn and plant more Cotton. However,  Informa Economics (formerly Sparks Co.) said that they expect the U.S. to produce 22.45 million bales of cotton in 2006-2007, down from 23.7 million bales the previous year. They also expect 119.7 million bales of world production in 2006-2007. 

The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change for futures open interest last week decreased by -2,068, posting a total open interest of 122,363 contracts. 

Traders are not to exceed the rule of thumb - 10% of equity to risk ratio.

If you do not fit this risk profile, traders are advised to consult their account executive for an option trading strategy.

WHAT DOES THE MAY COTTON CHART LOOK LIKE?

May Cotton had been in a nine-week price advance from lows posted at 52.65 (12/02/06) to recent highs of 58.60 (2/06/06).

Currently, May Cotton is in a four-week price decline from highs of 58.60 to recent lows of 54.00.

Cotton needs to maintain a foothold on a weekly and monthly close basis below 55.70 or a possible price advance might occur.

May Cotton has multiple unfilled price gaps above the current market price. The most recent unfilled price gap is between 56.15 and 56.55. The next unfilled price gap is between 59.80 and 60.80. 

May Cotton has one unfilled price gap below the current market price between 51.60 and 51.33.

May Cotton closed below its 40-day moving average and 50-day moving average - which as of Friday was at 56.85 and 56.41, respectively.

May Cotton closed Friday at 54.49 - which is below its 100-day moving average of 55.81 and 200-day moving average of 55.17

Two weeks ago I noted that the 100-day moving average was attempting to cross the 200-day moving average.  However, it was imperative that May Cotton post a weekly or monthly close above major resistance of 57.56.

For many weeks I wrote that May Cotton had developed a symmetrical bullish ‘V’ bottom formation or a ‘rounded saucer’ bottom formation.

Last week I wrote that May Cotton on the daily chart might be forming a bearish ‘V’ top or a bullish ‘double retracement.’  However, traders would not know the outcome until May Cotton posted multiple closes under 55.75 or multiple closes over 58.60.

It appears from last week’s price breakdown below 55.70 that the answer to the above question is a bearish ‘V’ top formation.

The bearish ‘V’ top began from highs of 58.60 through highs of 58.10 and 57.60. In addition, the daily chart for May Cotton has posted a bearish ‘island reversal’ top. 

Our objective from the ‘V’ top will be 52.90.

WHAT WERE TRADERS ADVISED LAST WEEK?

http://www.cleartrade.com/images/letter_2_26_06

WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?

Aggressive traders who purchased May Cotton were advised to liquidate their long positions below 55.20*.

Option traders who purchased July 67 calls, July 70 calls, December 75 calls and December 77 calls were advised to liquidate their option positions.

Below are possible ‘trading modules’ for futures traders to consider next week:

# 1) If May Cotton first has a price advance to resistance at 55.00:

Aggressive traders are advised to establish a short position, placing stops above 55.70*.

Option traders are advised to purchase May 53 puts, risking 70% of purchase price**.

# 2) If May Cotton posts a lower low than last week’s low of 54.00:

Aggressive traders are advised to establish a short position, placing stops at 56.15.

Option traders are advised to purchase May 53 puts, risking 70% of purchase price**.

Our first objective will be 52.90.

Below are possible ‘monthly reversal trading modules’ to consider:

# 3) If May Cotton posts a monthly close at or above 58.60:

If by the close of business on March 31st May Cotton posts a close at or above 58.60, aggressive traders will have liquidated their short positions and are advised to establish a long position, placing stops below 55.70.

I have compiled some Cotton option facts for traders:

Cotton options for a two-year ‘implied volatility’ average are ranked number 34 out of 45.

34) Cotton (CT) High 47.91% - Low 21.51% - Current 23.18%.

Cotton options for a one-year ‘implied volatility’ average are ranked number 37 out of 45.

37) Cotton (CT) High 38.90% - Low 21.51% - Current 23.18%.

Cotton options for a six-month ‘implied volatility’ average are ranked number 34 out of 46.

34) Cotton (CT) High 38.90% - Low 21.51% - Current 23.18%.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?CT06K

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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?CT

* (Futures traders and their account executives are advised to discuss this suggested stop).

** (Option traders and their account executives are advised to discuss the suggested risk). 

CHART WATCH by Scott R. Joss (Non member C.T.A)*

Readers and clients call during the week and ask: What are you watching?

Watching can mean that the markets are developing a 'recommendation' or a chart pattern that has not yet fully developed - or may never develop.

During the course of the week or month it is not uncommon to find an `intra-day, intra-week or intra-month' recommendation that was previously not revealed when this newsletter was written.

Products that currently fit into this 'watch' category are listed below and should be 'watched.'

JUNE BRITISH POUND (BP6M)

This week I will add the June British Pound to ‘Chart Watch’ because of a monthly recommendation for March.

The June British Pound has a monthly recommendation for March: buy when trades 1.7829 – sell when trades 1.7305.

This product is for aggressive traders only.

The ‘Commitment of Traders’ report - published each Friday by the CFTC - indicated the net change in open interest for futures last week increased by 1,539, posting a total open interest of 98,756 contracts. 

Traders are not to exceed the rule of thumb - 10% of equity to risk ratio.

The proposed monthly trade risk is $3,275, which suggests traders should have an account size of $32,275 per contract to trade this product.

If you do not fit this risk profile, traders are advised to consult their account executive for an option trading strategy.

WHAT DOES THE JUNE BRITISH POUND AND LONG-TERM CHART LOOK LIKE?

The British Pound has been in a one-year price decline that began from highs of 1.9500 (12/10/04) to lows of 1.7046 (12/02/05).

Recently, the British Pound has traded from lows of 1.7046 to highs of 1.7938 (1/27/06) before reversing and posting recent lows of 1.7283 (2/17/06).

Currently, the June British Pound has been in congestion between lows of 1.7306 and highs of 1.7946.

The June British Pound has closed below its 40-day moving average and above its 50-day moving average - which as of Friday was at was at 1.7602 and 1.7555, respectively.

The June British Pound closed Friday at 1.7558 - which is above its 100-day moving average of 1.7529 and below its 200-day moving average of 1.7677.

WHAT ARE TRADERS ADVISED TO DO NEXT WEEK?

For March, the June British Pound has a Monthly recommendation: buy when trades 1.7829 – sell when trades 1.7305. 

Below are possible ‘trading modules’ for futures traders to consider next week:

# 1) Aggressive traders are advised to wait for the rollover from the March British Pound to the June British Pound to be completed before establishing a position.

Traders are invited to contact us via IM (Instant Messenger) using Hotmail, Yahoo, Gmail and MSN to discuss our game plan and ‘trading modules’ during regular trading hours.

To contact us using IM, add cleartraderesearch@hotmail.com to your contact list and speak live with a ClearTrade account executive during regular trading hours.

I have compiled some option facts for traders:

British Pound options for a two-year ‘implied volatility’ average are ranked number 20 out of 45.

20) British Pound (BP) High 11.68% - Low 6.66% - Current 7.47%.

British Pound options for a one-year ‘implied volatility’ average are ranked number 14 out of 45.

14) British Pound (BP) High 8.90% - Low 6.66% - Current 7.47%.

British Pound options for a six-month ‘implied volatility’ average are ranked number 46 out of 46.

46) British Pound (BP) High 8.81% - Low 7.47% - Current 7.47%.

DAILY CHART:
http://www.bohl.minot.com/d_Chart.cgi?BP06M

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WEEKLY CHART:
http://www.bohl.minot.com/w_Chart.cgi?BP

* (Futures traders and their account executives are advised to discuss this suggested stop).

** (Option traders and their account executives are advised to discuss the suggested risk).

CURRENT 'MONTHLY' RECOMMENDATIONS FOR MARCH:

- MAY SOYBEANS

- JUNE BRITISH POUND

FUTURE WATCH

Future watch will list developing 'monthly' recommendations to watch in March for April. By listing these products, traders can `feed-forward' with anticipation and focus - centering on products that will provide direction and hopefully, opportunity.

Traders should begin studying the 'daily', 'weekly' and 'monthly' charts for the products listed below. Don't forget between now and the end of the month, some or all of these products may be de-listed.

'Monthly' recommendations will be revealed on the close of business March 31 and sent via email for April.

- Potential monthly recommendations for April will be posted in future Weekly Trade Advisors.