Eddie Topfik's Commodities Market Analysis

“It depends how thick your crayon is!” Eddie Topfik’s commodities market analysis

Andrew Saks

By Eddie Tofpik, Head of Foreign Exchange at ADM Investor Services International Limited. As at close of business on June 3, 2016, Eddie Tofpik takes a close look at commodity trading for this coming week SUGAR TREND UP I have been fully bullish on the bullet point above for some months now and I have […]

Eddie Topfik's Commodities Market Analysis

By Eddie Tofpik, Head of Foreign Exchange at ADM Investor Services International Limited.

As at close of business on June 3, 2016, Eddie Tofpik takes a close look at commodity trading for this coming week

SUGAR

TREND UP

I have been fully bullish on the bullet point above for some months now and I have been ‘harping’ on for more than a few months about a particular pattern on the Daily Chart above – to quote my opening sentence from last month’s report…‘I have been harping on for a few months about a pattern I saw on the Daily Chart above some while ago – a possible Ascending & Inverted Scallop Pattern which ultimately would lead prices up to the 19.20 – 19.40 area.’

This concept still stands as we are currently between 0.41 – 0.61 Cents away from it and it would be reasonable to look to see it being achieved. In its favour we have our first close over the very key 50% Absolute Fib at 18.09 last Friday plus apart from this there are only Andrews & Schiff Pitchfork Tines as resistance up to the 2013 high at 20.17.

I say only but Tines have been very good at showing the Angle of Attack of the market in this move with the Lower Tine of the Feb – Apr AP (currently 17.65) being very significant is support.

Therefore, the Middle Tine of this AP (currently at 19.74) should be seen as significant on tries higher just as the Lowe r Tine can be seen as significant support, especially on a two consecutive closing basis – for both. I do drew your attention to the Upper Tine of the Feb – Apr SP (currently 18.93), that may be significant short term resistance…so caution there.

Overall, here are the support levels 18.18(dynamic), 18.09, 17.74 (dynamic), 17.70, 17.29, 17.23(dynamic), 17.01(dynamic), 16.95(dynamic) & 16.39. 16.39 is currently key, if we have consecutive closes underneath this then we go into neutral.

Topside resistance is in two forms – non-dynamic at 19.40 – 19.60, 20.17, 20.50, 21.77 & 22.35 and then dynamic currently at 18.93, 19.74, 20.96 & 21.73. I finally draw your attention to the circled crossover of Tines on 17th of May. No sure which way but I suspect that the 17th will be a significant day in one form or another.

One more month of going sideways! The prospective Key Reversal Down last time at the end of Apr was supplemented by another on the 2nd of May…but this was another false dawn and prices moved back up over the current driver, the 50% Fib at 124.32…nothing’s going to happen till we get out of the range 111.04 – 137.61…and then it better be a really good break with lots of consecutive closes outside the range. Meanwhile, support is at 124.32, 121.48 – 120.75, 118.70, 117.03, 113.09 & 111.04. Resistance is at 127.46, 129.65131.95, 134.40, 136.40 & 137.61. Bullet point stays neutral!

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COFFEE

TREND?

Last month I…’… have drawn a prospective bullish Andrews Pitchfork on the Apr action but I cannot say if it is the angle of attack higher yet.’…and I was right not to push it too far as the rally had been nascent and the AP failed. However, a newer one has formed and this one has a better pair of legs and does indeed give the Angle of Attack of this market well.

Prices after my last attempt fell but were held up by the Long MA (currently 372) with the help of a Key Reversal Up on the 10th of May, this led to a break up back over the Apr 2015 high and up to test the key 50% Fib of the Apr 2014 – Oct 2014 move at 419.

This last move up was helped by another KR Up on the 1st of Jun and by the Golden Crosses of the Short/Medium MA up over the Long MA and also the Medium MA up over the Long MA a few days later. With all this we should be set for a try higher…and I hope so…but!

The ‘but!’ is because the 420 level is the prospective target for a possible Bull Flag/Halfway Hesitation formed over Apr – May and designated by an ‘X’ on the Daily Chart above…sorry to the bulls. With all the MAs pointing higher and the market looking the way that it does it ought to be a shoo in for a full bullish bullet point above.

However, I am always cautious and will go bullish with a question mark…though I’m prepared to go further next time if we take the ‘X’ away then the potential on the upside is the 2015 high at 439 with the resistance band above it of 439 – 446. Support in the meantime is at 413, 403, 401, 399, 395, 393, 385 & 381. Resistance is also at 419 – 420, 429, 439, 442 & 446.

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CORN

TREND UP?

A very odd month for this one…two days after my last review we had a Key Reversal Down on the Daily Chart which prompted the move down to the previous 446 support and in the process formed a Double Bottom. Prices then duly rallied but failed just over the recent 50% Fib resistance at 478 plus the Long MA (currently 478 coincidentally) and the Nov 2015 – Dec 2015 50% Fib at 483.

The fall thereafter was tempered by MA & Fib support around 464 and after another temporary try higher we finally managed to break up through the last of the old congestion band at 486 and then overcome resistance at 494 to close in territory not seen since Apr.

The rally has been confirmed as it is the 2nd consecutive close over the 50% Fibs at 483, 478 & 473 so with three out of four MAs pointing higher and Golden Crosses of the Short MA over both the Short Medium MA and the Medium MA I think it opportune to move the bullet point above into mildly bullish with a question mark.

What happens next depends somewhat on what happens when we reach the 502 area because that is a target for the action over May-to-date being a Halfway Hesitation and the target extension would be to there…marked by an ‘X’ on the Daily Chart above.

The next thing would be how the market deals with Upper Tine of the Dec 2014 – July Schiff Pitchfork (currently 506) and if that is dealt with successfully? Next, how the 511 high of 2016 is dealt with? Failure to try up to these and we’ll likely see the old 486 – 446 levels again. In the meantime, support is at 494, 485 – 478, 473 – 470, 464, 457 & 446.

Resistance is at 502, 504, 506, 510 – 511, 525, 530, 546, 565, & 569. This last level is a prospective target marked ‘Y’ on the Chart above as it marks where the extreme of a Double Bottom move up would amount to approximately from the recent bullish pattern.

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WHEAT

TREND UP?

My concerns expressed last time of whether the Aug 2015 high at 1046 or the Jul 2015 high at 1062 would be successfully targeted have been unfounded.

There was some initial resistance around 1046 but this was overcome well before mid-May and 1062 did not prove a substantial target as initially thought. We now have new highs for not only this year but for 2015 as well! So where next? Well there is a pattern I’ve not seen that often compared to say a Rounded Bottom Pattern which was my first thought – it is called a Bullish Bump & Run.

Typically you might see this rally to various parallels of the Channel that has been drawn with the highs in Nov 2014, Jun & Jul 2015 along with the low in Nov 2015.

In this case I have just drawn a straight doubled up parallel (currently 1234). It would seem a suitable target for this move if that turns out to be the actual answer – please note that the Doubled Up B&R Channel Line is dynamic and does decrease gradually.

However, in between there are two other potential targets – the 50% Fibs of the May 2014 – Nov 2015 move at 1190 & the 50% Fib of the Jul 2013 – Nov 2015 move at 1237…so these three levels are all potential targets on the upside.

Below the market, if prices get back to sub 1050 then we are back into neutral though I may extend that to 1020 as that’s roughly where the B&R Upper Channel Line is currently situated. Current support is at 1123, 1111 – 1107, 1098, 1088, 1082, 1044 & 1020. Resistance is at 1144, 1169, 1190, 1206, 1224, 1234(dynamic) & 1237. With all MAs pointing upwards I take great pleasure in mooing the bullet point above into fully bullish.

SOYBEANS

TREND UP

From last month’s review…the essence of recent action is there ‘…but looking ahead we have also run into a pretty heavy band of resistance in between the longer term Fibs 43.82 – 48.01…and that isn’t the half of it. The Oct 2015 high at 50.92 is also hanging over the market and that will need a powerful bit of support to try up to it.

I have drawn in my first bullish Andrews Pitchfork here for quite some time and it seems to give a good idea of the angle of attack of the market higher.’. First off, the resistance 43.82 – 48.01 has been seemingly successfully eroded and we are trading above that…but at what price?

The AP I drew and which seemed to give a great Angle of Attack of the bull market has also been eroded, we are well outside on the lower side and I am minded to take it off next time as it did show a good AofA until we hit 43.82. Finally, the 50.92 level has not been touched…not even close!

This is disappointing and is of concern if you are working form the bullish side. Even using the mid Mar – mid Apr action as a Halfway Hesitation only gives you about 49.50 target…something we’ve already achieved. Yet with all the MAs pointing upwards I would feel obliged to normally go into full bullish. However, my natural caution leads me to hold off a little while longer.

50.00 isn’t the key to this move – consecutive closes over 50.92 is though…otherwise we next test the Apr-to-date Uptrend (currently 46.82) and if that goes then the concerns for the bullish side become suddenly very real. Support is at 48.01, 47.75, 47.40, 46.82, 46.73, 43.82, 43.03, 42.50, 41.42 & 40.36. Resistance is at 49.47, 50.10, 50.21, 50.92, 52.17, 53.45, 53.89 & 57.33. To reiterate – bullet point stays as bullish but with a question mark.

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CRUDE OIL

TREND UP?

This statement absolutely sums up all the moves during the past month, including the somewhat failed Key Reversal Down on the 12th on the Daily Chart…’ All in all, the market has been trapped between the two Tines of a very mildly bearish Schiff Pitchfork! This brings its own questions.

I imagine that a little beyond the Tines and most probably on a two consecutives closing basis outside you may well find buy stops on the upside and sell stops below.

Remember, both these Tines are gradually going lower. Whatever happens outside of these Tines will seemingly determine the next major action of the market.

Separately, with three out of four MAs pointing higher, it is appropriate that the bullet point should go into mildly bullish but as I keep stressing, with the pressure of the Bearish AP Tines, do not be surprised if that changes.‘ That’s absolutely what’s happened this last month and the only things to add are we are again below the recent 50% Fib at 4723, below the Long MA (currently 4829) & the Medium MA(currently 4721).

We have a possible Multi Headed Double Top Pattern now formed and that ties in so closely to the Bearish APs that I would only say that an easy optimal target for it would be around 4200…or where the ‘X’ is marked on the Daily Chart above. Support is 4627, 4565, 4545, 4430, 4406, 4348, 4315& 4200.

Resistance would be at 4723, 4770, 4819, 4829(dynamic), 5004(dynamic). With MAs heading sideways or lower I’ve decided to move the bullet point above into neutral from mildly bullish.

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DEFINITIONS!

In the commentary you will note immediately following the commodity there’s a bullet point indicating the TREND. To clarify the comments & notes for this point I’ve prepared a short summary.

TREND UP – Any one or more of the following may occur! Market has turned upwards/risen & is likely to carry on, usually till at least the next Monthly Foreign Exchange Commentary. Moving Averages (MA’s) are pointing higher or have either crossed, formed a ‘Golden Cross’ or based out. Chart patterns & trendlines (Channel, Support, Andrew’s Pitchfork, etc…) point higher. No appreciable resistance levels (Fibs, Historical, etc…) are noted.

TREND UP? – Any one or more of the following may occur! Market exhibiting signs of exhaustion after a recent rally. Prices may be achieving an upside/downside target level or approaching major/strong resistance. Market may have started/completing a rally/recovery and it may be looking indecisive/going sideways or it is too early to tell in the short, medium or long-term charts. Moving Averages (MA’s) may point higher or have positive crosses but the picture is not conclusive. Some, but not all chart patterns & trendlines (Channel, Support, Andrew’s Pitchfork, etc…) indicate higher. Appreciable resistance levels (Fibs, Historical, etc…) are noted close to the market.

TREND? – Any one or more of the following may occur! Market exhibiting neither a bias for a rally or a decline. Market is either nowhere near or alternatively caught within narrow bands of support/resistance. Moving Averages (MA’s) point sideways & indicate no immediate likelihood of crossing. No strong chart patterns or trendlines evident. …Sometimes… I frankly haven’t a clue!

TREND DOWN? – Any one or more of the following may occur! Market exhibiting signs of a recovery after a recent fall. Prices may be achieving an upside/downside target level or approaching major/strong support. Market may have started/completing a decline/fall and it may be looking indecisive/going sideways or it is too early to tell in the short,medium or long-term charts. Moving Averages (MA’s) may point lower or have negative crosses but the picture is not conclusive.

Some, but not all chart patterns & trendlines (Channel, Support, Andrew’s Pitchfork, etc…) indicate lower. Appreciable support levels (Fibs, Historical, etc…) are noted close to the market.

TREND DOWN – Any one or more of the following may occur! Market has turned down/fallen & is likely to carry on, usually till at least the next Monthly Foreign Exchange Commentary. Moving Averages (MA’s) are pointing lower or have either crossed, formed a ‘Dead Cross’ or topped out. Chart patterns & trendlines (Channel, Support, Andrew’s Pitchfork, etc…) point lower. No appreciable support levels (Fibs, Historical, etc…) are noted.

THE STORY OF ‘ Eddie’s Crayons…* ’

This refers to a deep, long conversation I had with another technician (and also a very dear friend) as to where exactly the neckline on a H+S Top on USDJPY should go… to which he uttered in exasperation & seriousness the immortal words….

‘’…Eddie…it depends how thick your crayon is!!!’’

Thank you Lou – we laughed till I started to hurt & it made my day!

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