Today In Commodities: Watching Crude

by: Matthew Bradbard

As long as April crude remains above $105/barrel the sentiment is bullish. That being said prices are currently $4 off their highs from last week and daily stochastics have started to roll over. I’m suggesting aggressive traders to be positioned for a setback in prices. A 50% Fibonacci retracement of the last leg would drag prices back near $103. On a $4 downward move in crude expect the distillates to lose 12-15 cents. Natural gas is off 15% in the last two weeks and at present I would not suggest catching this falling knife as a trade under $2 is not out of the question. Indices appear to be consolidating, unable to reach higher ground of late. Prices did close below the nine-day MA today and with consecutive settlements below that pivot point I would be willing to call an interim top. On that exit longs and reverse willing to risk a trade to new highs. That level in the S&P is 1366 and at 12,965 in the Dow.

Gold has started a correction having lost $75/ounce in the last four sessions. On the daily chart notice the flag and pennant formation. This should indicate lower ground and on a settlement below the 100 day MA that would be a confirmation. That level has held on recent attempts but I do expect it to give way in the coming sessions. My target in the June contract is a 61.8% Fibonacci retracement at $1639. May silver has lost ground three of the last four sessions, losing approximately $4/ounce in that time. Further pressure should drag silver closer to $30-31 on the May contract in the coming weeks.

Sugar appears to have made an interim top last week. Aggressive traders can gain bearish exposure with a first target of 23.50 in May, remaining short as long as a new high is not made. Cotton gained the daily limit as prices are expected to pick up in the immediate future. I would prefer to be a seller from higher levels ... stay tuned. Treasuries remain range bound and I see no reason to be on either side of the market with speculative clients. Aggressive traders could be gaining bearish exposure on either live or feeder cattle to play an immediate reduction in prices. I’m operating under the influence an interim high was achieved last week. Corn and soybeans remain in bull mode but the fundamental story is not as bullish as the technical picture. I think we’ve advanced too much of late and advise clients to wait for a retracement. The commodity currencies look vulnerable. My favored way to play a trade lower in the Aussie, Kiwi and Loonie would be short futures while simultaneously selling out of the money puts for protection.

Risk Disclosure: The risk of loss in trading commodity futures and options can be substantial. Past performance is no guarantee of future trading results.