October 17, 2016
DEFINITELY BUYING WHEAT
I THINK WHEAT HAS STARTED WHAT I BELIEVE IS THE INEVITABLE SHORT COVERING RALLY I HAVE BEEN LOOKING FOR…AS I HAVE BEEN NOTING, LARGE SPECULATIVE FUNDS ARE HOLDING THE LARGEST SPECULATIVE SHORT POSITION IN THE HISTORY OF WHEAT FUTURES TRADING…TO EXIT THOSE SHORT POSITIONS, THEY HAVE TO BUY THE MARKET…AND THEIR RECORD POSITION DOES REPRESENT THE SORT OF MASSIVE BUYING THAT I BELIEVE CAN PRODUCE A $1.50 TO $2.00 RALLY IN A MATTER OF WEEKS OR A FEW MONTHS.
MORE THAN ANYTHING ELSE, MARKETS MOVE DUE TO BUYERS AND SELLERS GETTING IN AND OUT OF POSITIONS. I MAY BE DEAD, DEAD WRONG BUT I THINK THE TIMING IS NOW PERFECT TO SEE A NONSTOP UPSIDE PRICE EXPLOSION IN WHEAT.
I ALSO WOULD SAY THAT IF THIS ISN’T GOING TO HAPPEN (IF THE LAST 3 DAYS ARE ONLY A FAKEOUT, THE NEXT THING WE WILL SEE IS AN ABSOLUTE REVERSAL BACK DOWN TO THE LOWS, IN WHICH CASE THE 1 CALL & 1 PUT COMBINATION I AM RECOMMENDING BELOW SHOULD WORK OUT PERFECTLY.
These numbers are not wishful thinking…
Here is a reprint from my last newsletter…DO NOTE THE SIZE OF THE FUND SHORT POSITION…AND THE COMMERCIAL LONG POSITION DIRECTLY OPPOSING THE FUNDS…
I include the following chart (updated from a recent newsletter) to show you that $2-$3 moves are QUITE COMMON in Wheat.
Even though we have had nothing but bearish USDA reports for several months now, the fact is Wheat made its low tick back in August…It has now rallied, off ZERO news whatsoever, almost 30 cents in the past 3 days…I CAN ONLY SURMISE THAT THE FUNDS, WHO ADDED TO THEIR SHORTS DURING THE PAST SIX WEEKS AT NOW LOWER LEVELS (AT NOW LOSING PRICES), HAVE BEGUN TO DO WHAT THEY HAVE TO DO SOONER OR LATER: BUY THOSE SHORTS BACK…I HAVE BEEN WRONG FOR A WHILE ON THIS, AND I STILL MAY BE WRONG, BUT I DO THINK THE ODDS SUGGEST THIS IS FINALLY IT…AND IF IT IS, MY BET IS THAT “WATCHING IT”, OR “WAITING FOR A PULLBACK “ IS NOT WHAT YOU DO HERE.
I AM BUYING. I THINK THE 1 & 1 SHOWN IS THE DEAD LETTER PERFECT STRATEGY HERE AS I THINK THE LAST THING WHEAT WILL NOW DO IS GO SIDEWAYS.
I would also add that, if you do have the risk capital, “waiting to see what the Eurodollars do” is irrelevant here…This trade stands on its own. I LOVE the Eurodollar position but I LOVE this one as well. As I have repeatedly stated, “I will not be out of this trade”. As we all well know, timing is everything in this stuff…and I do think the time to act on this…is now. It goes without saying, this is my opinion and I may still be wrong.
Give me a call…
All option prices in this newsletter include all fees and commissions.
The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: Wheat