Saturday, December 17, 2011

Futures Setups I'm Watching (Week of 12/18/11)

Soybeans were on my radar most of last week looking for a squeeze out of this setup. Managed to take a bit out of it but I believe there is still solid potential for a significant move to the upside. Working out of a massive positive RSI/MACD divergence, its downtrend line was broken on volume Friday. It's been in a down channel for almost 3 months and was stopped at the top rail.

The hourly chart shows the resistance encountered at the top of the channel. One can enter on a break of this downtrend line or look for a pullback to the 1120 area. Shorter term resistance levels are 1145 then 1152. Support at 1120 then 1110 areas.

I've been tracking all of the grains for quite some time and felt their charts were some of the nastiest out there. But they've steadfastly refused to break. I am leaning towards wheat developing a falling wedge pattern here as it's made lower lows with positive divergence in the RSI and MACD. If this is the case, there is huge potential here. Of course another way to potentially play this would be through a long wheat - short corn spread I blogged about here.

On an hourly time frame, we've made a falling wedge and within that a small inverted head and shoulder pattern is potentially forming. A move above 586.5-587 on strong volume would be a signal to get long for me. One can also be more cautious and wait for this wedge to resolve to the upside.

I've never traded cattle before but I believe there is a potential short setup here in feeder cattle. We've been in an uptrend with a developing negative divergence. Above is the H (March '12) contract but a similar pattern is forming in other contracts. Kumo has flipped bearish with the tenkan-sen below the kijun-sen. Chikou span (red line) has moved below price. I think a break here gives a solid 10 points of downside. Take a look at Lean Hogs and its breakdown on Friday.

I will be taking a short only here on a break of this rectangle on the hourly to the downside.