While I am pretty flexible about what I like in a vehicle, my wife has very specific vehicle requirements: it has to be a certain color, have a specific body style, particular options, etc. Therefore I thought a visit to the car dealership would be a fairly safe trip as I never imagined that they would have just the vehicle she had in mind in stock.

So now we are the proud owners of a brand new Honda Odyssey mini-van. Actually I’m quite impressed with the workmanship on the new vehicles. It wasn’t that long ago that people used to say “they don’t build them like they used to” when referring to new cars, but this is no longer the case.

The fit and finish is wonderful and the vehicle rides like it is floating on air. It has every option known to mankind from the seemingly standard power windows and door locks to fold away rear seats, separate temperature controls for every part of the vehicle, and my particular favourite, automatic sliding side doors. Now when

I’m driving I feel more like I’m piloting the space shuttle than driving to the mall.

All these amenities come with a healthy price tag however. It is hard to believe that a new vehicle nowadays costs as much as a house did 10 years ago. What’s really annoying however is the assortment of creative taxes that the various levels of government have created to penalize you for buying a new vehicle.

Not only do we get to pay for the vehicle but courtesy of the government we also get to pay an air tax, battery tax and tire tax, which I assume is to punish you for the various forms of pollution the vehicle will eventually cause. Combine these with local and federal taxes and viola!, just like magic, you’ve added another $5000 to the sticker price of your vehicle. Frankly I’m surprised that the bureaucrats at the tax department haven’t come up with an “air-in-your-tires tax”…or maybe I shouldn’t give them any ideas.

While we really love the new vehicle, our little visit to the car lot did make for a rather expensive afternoon. Oh well, another lesson learned. I’ll have to file it away with the lesson I learned about “visiting” the local animal shelter, but that’s another story. ;-)

Enjoy this week’s issue.

After giving us a rather convincing bullish breakout off support earlier in the week, corn stalled on resistance at 246 and subsequently plummeted back to the previous support level at 235. While current support seems to be fairly firm the market might lack the bullish momentum needed to send prices higher; therefore we might see prices chop around and range between support and resistance levels in the near future.

If the bears continue to control the market, as they did the latter part of last week, look for prices to continue to test the support at 235. If we see a close below here it is likely that prices will continue to decline to the next support at 230 which roughly corresponds to the weekly 38% retracement and the monthly 50% level.

Below here is scattered support at 228 ¼ and 225 ¾ before the contract low at 224.

If the bulls muster another rally look for initial resistance at 241 which would be the middle of the gap formed last week. There is more resistance just above here at 246 and again at 250, which might be considered the top of the range which is currently holding back the market. Once the market is above here look for more resistance at 255 ½ and again at 258 ½.

Cotton continued to trade sideways last week stuck in the range between long term resistance at 5247 and support at 5075. Seasonally speaking this is usually a bullish time of the year for this particular commodity; however prices are hesitating going higher as the market searches for direction.

If the bulls manage to drive prices higher, a breach through the top of the channel would see cotton challenge the next long term resistance level at 5350 before testing the resistance at 5500. However the last three weeks have seen cotton unsuccessfully attempt to breach the resistance at the 38% retracement level on the weekly chart at 5247.

If the market gives up trying to go higher, look for prices to fall through current support at 5075 to nearby support at 5023 which is also 50% of the last six week uptrend. Below here we see more support at 4905 and again at 4863 which is the 50% retracement of the October to January uptrend. If prices continue to fall below here look for them to test the recent low of 4800 as well.

After testing the neckline of the rounded bottom formation for most of last week, bean prices collapsed last Friday falling abruptly to support at 555 and leaving a huge gap in the wake. Moves like this are why traders often refer to soybeans as “the pork bellies of the grain market”. The market continues to be trapped within a larger trading range extending from 593 to 530 ½ which should see beans continue to trade sideways until they commit to a direction.

Just below the current low is a nearby resistance zone at 544 – 553 which will likely support the market. This range has turned the market around several times and could do so again. If the bears manage to push prices through this range look for more support at 536 before encountering the bottom of the larger trading range at 530 ½.

Above current prices is the large gap that was the result of last Friday’s trading. If the market decides to fill the gap next week it will encounter resistance near the middle of the gap at 573. Higher prices would also see the market re-test the neckline of last week’s rounded bottom formation at 585 before possibly challenging contract highs at 593.

Cattle prices rallied higher on declining volume last week before encountering long term resistance at 8200. The drop off in volume would seem to indicate that the market is losing steam as prices continue to try and push higher. While the market is currently in an uptrend, it is not unusual to see cattle prices top out about this time of the year and subsequently fall off before making another run at higher prices in late winter/early spring.

If the current resistance at 8200 holds, look for prices to decline and find initial support around 7965 to 7940. Prices get a little room to move below here as the next support level is not until 7835 followed by more support at 7710. If we see prices continue to decline the next stop might be the 38% retracement at 7567.

While seems the bulls could be losing their grip on the market the current trend is still up. If we see prices continue still higher look for resistance at 8270 followed by 8360 and again at 8430. While there is some room for the market to move to the upside as well, I would not have too much confidence in a bullish breakout unless we see increasing volume accompanying it as well.

Cocoa bounced around last week after it encountered serious long term resistance at 2200. While the market is still in a short and long term uptrend, it seems to be losing its sense of direction. Luckily the market confined itself to a small-ish range which we can bracket as a channel for next week. The top of the channel would be the resistance at 2200 while the bottom of the channel is on support at 2078.

While a breakout above 2200 would require quite a bit of momentum a close above this level would be required to prove that the bulls still have control of the market. In the event that the bulls manage to push prices higher there is mild resistance above 2200 at 2247 with more substantial resistance nearby at 2310 and the contract highs at 2394.

If we see a breakout below support expect prices to test the nearby support level at 2008 before retracing 50% of the recent uptrend at 1927. If the market does not rebound off this retracement level look for the market to continue to decline to support at 1800 and 1711 before testing the low of the recent uptrend at 1655.

Sugar prices continue to test the upper boundary of the symmetrical triangle formation formed over the last few weeks. The highs of last week at 777 also correspond to resistance earlier in the chart. This is normally the time of year that we see sugar prices peak, which combined with the fact that we are trading near some significant long term resistance, might be enough to send prices lower next week.

A breakout down through the triangle would see prices first test support at 730 followed by more support at 716. If prices continue to decline from here look for the market to test support near the 62% level at 685 and more support at 670 before retracing to the 50% level at 654. If we do not see a bounce here there is more support on the other side of the 50% at 641.

Given the current state of the sugar market I would be suspicious of any breakout to the long side. If we did see a bullish move next week it would need to be accompanied by increasing volume otherwise it will be short lived. Resistance through the topside of the triangle are last week’s highs at 777 followed by the resistance at the contract high of 789. Above here we encounter resistance near 810 before reaching the weekly 50% level at 820.

The Swiss Franc spent most of last week consolidating itself into a trading range. While we did get a little pullback it was not as large as anticipated. While the market still seems to be extremely bullish, the rally during the last three sessions was on decreasing volume, which could be an early indication that the trend is slowing down. Fortunately the market made a rounded bottom, or what some folks might see as a double top formation before the end of the week, so we can use this to set up our trade for next week.

The neckline of the rounded bottom is at Friday’s high of 7266. A close above this level, which an accompanying increases in volume, should see prices continue higher. The next resistance above the current highs can be found on the long term charts at 7380 followed by more resistance at 7455.

If the current resistance proves too much for the market look for prices to retreat to the first support level at 7127. Below here we have the 62% retracement at 7046 followed by the 50% at 6977, which should shore up a falling market. Coincidentally the 50% retracement level is very close to the old contract highs which held the market back for so long last fall.

Silver behaved itself nicely last week stopping just 50 cents beyond the resistance we pointed out at 494. From here the market traded sideways for the remainder of the week forming a nice pennant formation in the process.

There is substantial long term resistance just above the market which might see prices head lower next week. If prices break down out of the pennant look for initial support on the resistance at 474 which is just above the 62% retracement of the last uptrend at 470. There is more support around the 462 range which also coincides with the 50% retracement level and again at the 38% level of 455. Below here a declining market would next find support around 445 and 441.

A break up out of the pennant would see prices once more test the upper resistance at 494. Beyond here the next resistance is found at 503 and 507.50 before testing the resistance near the contract highs at 517.

The trading-price Ranges, Breakouts, and Pivot Point calculations for Corn, Swiss Franc, Silver, and Soybeans for tomorrow (Jan 13, 2003). Fresh calculations for these and other commodities are posted daily, and new commodities are being added weekly. Very useful, so bookmark this page!  http://www.TradingThingys.com (Free Stats and the Trade Log).
 

I completely understand the logic of using multiple contracts when trading off of well defined support or resistance levels; however, is there a defined strategy on how many contracts to enter with when using formations such as flags, pennants, channels etc.?

Your question is a good one, but with no real hard and fast answers. As you know you can take multiple contracts anytime there are hard floors or ceilings formed by resistance; although as you've pointed out, there might not always be well defined support or resistance in formations such as channels or pennants. In these cases you need to consider the size of your account, and the strength of the formation to determine if you want to use multiple contracts in your trade.

If your account size can manage it, you can take multiple contracts in any trade to make the trade more worthwhile; although in the absence of well defined support and resistance levels there is greater risk involved. For example I know of a trader that uses options to trade the Financial Indices. He has a mere $100 profit target for each option, and trades 10 options at a time; therefore he has a potential profit of $1000, without asking too much of the market. This strategy requires deep pockets however, since if the market goes against him a mere $100 he can just as easily incur a $1000 loss, but I'm sure you can see the potential of using multiple contracts to increase your earnings.

A safer route for the small trader to follow is to consider the strength of the channel or pennant to determine if it is safe to use multiple contracts. The easiest way to determine formation’s strength is in terms of time. Generally speaking the longer the market has been in the channel or pennant the more reliable the breakout.

I would never consider taking multiple contracts off a channel or pennant that was a mere three days in length (unless the channel had formed significant resistance on one or both sides); however if there is a channel or pennant that is several weeks in length I would be more confident in using multiple contracts in this type of trade. This does not mean that whipsaws are not possible, but they are less likely.

The longer a market is caught in a channel or pennant the more reliable the breakout when it finally occurs. I remember a while ago coffee was caught in a small channel for several months. When it finally broke out of the small channel it skyrocketed to near record highs. Take a look in the history of your charts and you will see that the most reliable breakouts come from longer channels and pennants.

Erich