Opportunities in Ags

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley  

Following some explosive moves earlier in the year, the past few weeks have been full of sideways action for commodities.

Energy contracts are correcting. Copper continues to consolidate. And gold is chopping around in the middle of its multi-year range.

But when it comes to commodities, there’s always an opportunity right around the corner. 

Last week, we pointed out the burgeoning strength in natural gas futures despite the corrective action in crude oil and its derivatives.

Today, we’re going to outline a few developing setups with a focus on ags.

Let’s dive in!

First up are corn futures:

Since last November, we’ve had our eyes on the grain markets, and corn has been one of our most successful trades. It completed a larger basing pattern earlier in the year and has formed a tight bullish consolidation since.

We want to buy an upside resolution from this consolidation, utilizing the May contract if and when a breakout occurs.

We’re buying May corn $ZCK2 on a decisive close above 783 with a target around 981.

Next, we have soybean oil:

Soybean oil futures recently hit new all-time highs. After a period of digestion, we think a fresh leg higher is in the cards for this soybean derivative in the near future.

If and when bulls manage to push the July contract above its recent pivot high around 73.60, we want to be buyers with an initial target near 87 and a longer-term objective near 95.

Next, we have oat futures:

Oats broke to new all-time highs last fall and have since carved out a multi-month base. We want to continue to ride this uptrend in oats higher.

When we drill down to the most actively traded contract it’s already breaking to fresh highs:

We want to be long the May contract as long as it’s above 762 with a measured move around 940 and a longer-term target around 1140.

The sweet stuff also looks poised for another leg higher. Here are sugar futures carving out a multi-month base below their highs from last fall.

The best way to play a breakout is through the July contract.

We want to buy on strength above 19.70, targeting 25.

Last but not least, we have butter futures:

Cash-settled butter futures are on the verge of completing a massive multi-year base. And yesterday the May contract narrowly closed at a contract high.

We want to buy strength in May butter futures above 277.25 with an upside objective near 380.

Thanks for reading.

Be sure to check out our COT Heatmap and Trade of the Week below.

COT Heatmap Highlights

• Soybean Meal: Commercials added to their shorts last week and are now less than 3% away from a three-year extreme.
• Orange Juice: Commercial hedgers hold their largest short position in three years.
• Japanese Yen: Commercials are less than 3% away from a three-year net-long extreme.
• Australian Dollar: Commercial hedgers have unwound their net long position by more than 60,000 contracts in the past four weeks.

Click here to download the All Star Charts COT Heatmap.