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Any fool can get into a market, but it's the real pros that know when to get out.

- Jim Wyckoff

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January 22, 2008

Special Message from Our Author
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They say "timing is everything" and this is especially true when it comes to trading. This means you need tools that can help you time your trades with high accuracy and precision. Unlike most trading tools and information, VantagePoint does not follow trends. It forecasts them with up to 80%* accuracy!

Today's Featured Article
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Weekly Charts -- A Valuable Tool
By Jim Wyckoff

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Coffee: Legendary trader/analyst W.D. Gann said it is the weekly charts that are the most valuable to a trader. The weekly charts filter out the "noise" of the daily charts, yet are not so compressed as the monthlies. See on the weekly chart for nearby ICE coffee futures that uptrend lines are in place. There is some strong overhead longer-term technical resistance at the 140.80 level, basis nearby futures. A push above that key price level in the nearby futures contract would be a longer-term bullish technical signal to suggest significant price gains forthcoming.

Coffee chart

If you cannot view the Coffee chart, go here.
Chart courtesy of TradingEducation.com

Sugar: See on the weekly continuation chart for nearby ICE sugar futures that recent price action has produced a bullish upside "breakout" from an ascending triangle pattern. Those of you who've followed my work for a while know that I place much emphasis on the classic technical chart patterns such as triangles. These classic chart patterns as well as other tried and true technical analysis methods are found in John J. Murphy's excellent text book, "Technical Analysis of the Futures Markets." See on the weekly chart for sugar that there is some overhead resistance at 12.65 cents, basis nearby futures. A move above that key resistance level would be longer-term bullish to suggest more upside price movement in the coming weeks. Sugar is one of the few commodity futures markets that has not seen a strong bull run to near record highs. That suggests that if prices do continue to trend higher, much more upside in this market is possible. (See my in-depth commentary at www.TradingEducation.com)

Sugar chart

If you cannot view the Sugar chart, go here.
Chart courtesy of TradingEducation.com

Cocoa: Speaking of classic chart patterns, see on the weekly continuation chart for nearby ICE cocoa futures that a bullish symmetrical triangle pattern had formed and then recent price action saw an upside "breakout" from that pattern. Nearby cocoa futures do find strong overhead longer-term technical resistance at the 2007 high of $2,277. A drop in nearby futures prices below strong trendline and psychological support at the $2,000 level would deflate the bulls and suggest a major market top is in place and that prices would then trend sideways to lower.

Cocoa chart

If you cannot view the Cocoa chart, go here.
Chart courtesy of TradingEducation.com

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Live Cattle: The weekly continuation chart for nearby live cattle futures shows that prices have recently dropped below a strong technical support zone, which now has become a strong technical resistance zone. A drop in nearby live cattle futures prices below solid longer-term technical support at the $90.00 level would produce more longer-term technical damage. See, too, on the weekly live cattle chart that a bearish descending triangle pattern has formed.

Live Cattle chart

If you cannot view the Live Cattle chart, go here.
Chart courtesy of TradingEducation.com

Lean Hogs: The weekly continuation chart for nearby lean hog futures shows that serious longer-term technical damage has been inflicted in this market in recent months. And more recent price action has formed a bear flag pattern. A drop in nearby lean hog futures prices below the solid support level at the 2007 low of $50.65 would produce more serious longer-term chart damage to suggest strong downside price pressure after that. If you do trade meats I suggest you reading my daily blog which can be accessed by going to www.TraderEducation.com.

Lean Hogs chart

If you cannot view the Lean Hogs chart, go here.
Chart courtesy of TradingEducation.com

Oats: See on the monthly continuation chart for nearby oats futures that prices have recently soared to the second-highest levels in oats futures trading history. However, prices just very recently have backed way off the high of $3.43 a bushel, basis nearby futures. See, too, that history shows when major bull runs are uncorked in oats, the market puts in a V-Top reversal, as prices drop as fast as they rise, once a market top is in place. The monthly oats futures chart looks similar to the corn, soybeans and wheat monthly charts: Big bull market runs produce a spike top followed by a big downdraft in prices--to produce V-Top reversals (for all news on commodities go to www.TraderNews.com) History repeats itself in market price action. Until that is not the case, an examination of longer-term monthly charts is paramount for traders.

Oats chart

If you cannot view the Oats chart, go here.
Chart courtesy of TradingEducation.com

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Lumber: I have a group of readers who closely follow the lumber futures market. Most of those readers want to be bullish--especially given that lumber prices have sunk so far despite the big rallies in most other major raw commodity futures prices. My words of wisdom for those lumber bulls: Make this market show some solid near-term technical power before becoming a buyer. The lumber market is a strongly trending market, as history shows. If the market spurts higher and puts in a bottom, then it's likely there would still be much more room on the upside. Here's a bone I'll toss the lumber bulls: See on the weekly continuation chart for nearby lumber futures that price action the past 3.5 years has formed a bullish falling wedge pattern.

Lumber chart

If you cannot view the Lumber chart, go here.
Chart courtesy of TradingEducation.com

Euro Currency: The weekly continuation chart for nearby Euro currency futures shows that the trend in the Euro is still up, but there is stiff overhead technical resistance just below 1.5000. See that a bullish symmetrical triangle pattern has formed on the weekly Euro chart. At www.TraderQuotes.com you can see interactive charts for the currencies and forex. There are no early warning signals that the uptrend in the Euro will fizzle out anytime soon. A drop in nearby Euro currency futures prices below the solid support level seen at 1.4300 would begin to give the Euro bears some longer-term downside technical strength.

Euro Currency chart

If you cannot view the Euro Currency chart, go here.
Chart courtesy of TradingEducation.com 

S&P 500: The weekly S&P 500 futures chart shows that just recently the market has seen a bearish downside "breakout" from a rare and bearish diamond pattern on the weekly chart. Diamond patterns usually form at market tops and are formed by higher volatility at higher price levels. My bias is that there is indeed still more downside price potential for the U.S. stock indexes. Not only are the technicals bearish for the stock indexes, the fundamental picture has also turned significantly bearish as the U.S. is in or near an economic recession.

S&P 500 chart

If you cannot view the S&P 500 chart, go here.
Chart courtesy of TradingEducation.com

About the Author
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Jim Wyckoff is the senior market analyst with www.TradingEducation.com. He received his degree from Iowa State University in Ames, Iowa, where he studied journalism and economics.

Jim has spent nearly 25 years involved with the stock, financial and commodity markets. He was a financial journalist with what is now the Dow Jones Newswires service for many years, including stints as a reporter on the rough-and-tumble commodity futures trading floors in Chicago and New York. As a journalist, he has covered every futures market traded in the U.S., at one time or another.

Not long after he began his career in financial/commodity market journalism, Jim began studying technical analysis. He found it fascinating. By studying chart patterns and other technical indicators, Jim realized the playing field could be leveled between the "professional insiders" in the markets, and traders/analysts like himself. Jim also spends time studying the fundamentals in markets.

Special Message from Our Author
----------

They say "timing is everything" and this is especially true when it comes to trading. This means you need tools that can help you time your trades with high accuracy and precision. Unlike most trading tools and information, VantagePoint does not follow trends. It forecasts them with up to 80%* accuracy!
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Disclaimer: The Commodity Futures Trading Commission has asked us to also advise you that trading futures is not without risk. While there is opportunity for incredible wealth building, there is also the risk of losing even more than you invested. Of course, that's not unlike most other businesses. But informed traders are the best traders! Opinions expressed by Fast Break authors are not those of FutureSource.