ClearTrade Commodities Weekly Newsletter 3/24/02
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MAY COFFEE(KC2K):
YEAR TO DATE:
HIGH: 81.50 on 05/08/01
LOW: 45.60 on 02/12/02
CLOSE: 55.60 on 03/15/02
CLOSE: 54.30 on 03/22/02
Coffee had been in a congested trading range for four months between 45.60 lows and 54.50 highs.
Previously we discussed how coffee has a tendency to have large, erratic price moves.
On 3/05/02, coffee posted a 'weekly' buy signal 49.05.
For several weeks traders were made aware the Bollinger Bands had tightened, indicating this product was coiling for a major move.
A major move has occurred. Will it continue?
For next week coffee has a 'weekly' recommendation: buy when trades 56.30 - sell when trades 50.45.
We discussed for several weeks that direction and risk for this product would be a problem. This has not changed.
Several weeks ago, traders were advised to establish a long options 'volatility' strategy commonly referred to as a `long strangle'.
Traders were advised to buy the May 55 calls and buy the May 45 puts.
The total option premium paid was $660.00 - plus commissions.
The current total for the 'long strangle' as of Friday was $1,008.75.
Last week, traders were advised to place a stop for the 'long strangle' at 270, which should have been activated.
Conservative traders were advised to accept profits and roll into a bull call spread.
Buy the July 60 calls and sell the July 70 calls.
This gives traders a 5-to-1 risk/reward ratio (not including commissions).
Remember to only risk 50% of purchase price of the bull call spread.
Aggressive traders who entered a long position at the 'weekly' buy signal of 49.05 are now advised to move stops to 50.45, which is the 'weekly' sell signal.
Traders who added to their existing long position on a 'weekly' close above congestion at 54.60 should move those stops to 53.00.
Aggressive traders are advised to add to their existing long position if coffee posts its 'weekly' buy signal at 56.30, placing stops at 53.00.
Short-term objective of 56.50 has been met.
Intermediate objective of 57.00 has been met.
Long-term objective will be 61.10
If coffee trades to 61.10, traders should take profits (except July bull call spreads) and look for coffee to establish a new trading range.
However, if coffee posts its 'weekly' sell signal at 50.45, traders are advised to exit all long positions and look for a possible price failure back down to 50.00 - where a previous gap was left.
A close below 50.00 should influence coffee back down to the low end of the congestion of 47.90.
DAILY:
http://bohl.minot.com/d_Chart.cgi?KC02K
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WEEKLY:
http://bohl.minot.com/w_Chart.cgi?KC