While we all might have a different definition of what success is, one thing is for certain, we all want to be successful. In spite of this however, few of us are willing to do what is necessary to achieve our version of success.

Unfortunately becoming successful rarely comes without sacrifice. Nobody likes sacrifice. After all, sacrifice hurts. Sacrifice means having to give up something we like, in order to get something else we want…like in a diet, and nobody likes a diet. ;-)

I can probably safely assume that if you are reading this newsletter you are interested in becoming a better trader, but the big question is are you willing to do what it takes to become a better trader? I can see you sitting there nodding your head “yes”, but it is not that easy. Becoming a better trader will require some sacrifice; fortunately however, the sacrifice required to become a better trader is not usually a big one.

Becoming a better trader doesn’t require a lot of brains, or a lot of special skills, but it does require some time and practice. You need to devote time to practicing your trading system until you know it backwards and forwards. You need time to learn to recognize reliable market signals and to understand how the markets react. You need practice to know when the right time to take a trade is and when it is time to stand aside. None of these things are particularly difficult to learn, but as I said before, they do require time and practice.

So, are you working hard enough to achieve the success you desire? Well here’s a clue. If you're holding a remote control in one of your hands, the answer is probably “no.” :-)

Have no fear; we’re doing what we can to help you succeed. Next week marks the beginning of a new feature in our ezine. Tom Loge’, the well respected option guru, will be giving us an option variation on the trades we analyze each week. It’s just one of the ways we’re working to make this a better publication for you.

We want to see you succeed and we’re doing what we can to help, but the rest is up to you.

Okay, I’m putting the soapbox away, for now. :-)

Enjoy this week’s issue.

After finally breaking through the hard support at 235, corn prices tumbled to the next support level at 228 ¾ where they spent most of last week. Prices continue to test the new support level, and while the market is in a definite downtrend, we might see a pullback in prices next week as the market could attempt to fill the gap that was left behind when prices fell January 9th. Just to be on the safe side we could use the Friday’s range as the boundaries of a sideways channel that brackets most of last week’s action.

A move above Friday’s high would see the market test the assortment of resistance to the upside. Any serious bullish move should see the market clear the resistance at 235 and test the resistance at the 50% level of the recent down move at 237 ½. If the market does not bounce here look for prices to continue higher to the resistance in the middle of the gap at 241. If the uptrend continues we will likely see a re-test of the resistance of 246 as well.

As we pointed out the market is still in a definite downtrend. A break below current support at 228 ¾ will see prices continue down to the next support level at 225 ¾ before testing the contract lows at 224. While increasing volume is not necessary to sustain a bear market, it would be nice to see as these are some pretty substantial support levels in corn.

The end of last week saw cotton finally emerge from the trading range that confined the market for the last four weeks. The rather decisive close below the bottom of the range at 5075 could signal lower prices to continue next week.

While it seems that the bears have control of the market for the time being we are fast approaching the short term 50% level at 5023 which might see an upward bounce in prices before continuing to head lower. If the market continues below the short term 50% there is long term support nearby at 5000. Below here there is still more support at 4940 and again at 4900 before the market is in a position to reach the 50% retracement of the larger October to January uptrend at 4863.

If Friday’s break through support was a false break, look for prices to reverse and test the resistance just above the top of the trading range at 5250. Once above here, the market would encounter more resistance at 5350 and again at 5500.

After falling like the proverbial rock the week before, beans found support at the bottom of the resistance channel we pointed out at 544. From here the market found its footing and continued higher toward the end of last week. While the market is still confined to a larger trading range that has trapped prices since last September, it looks as though the bulls could be mounting a comeback therefore we might expect to see higher prices next week, at least for the short term.

The first resistance to a bullish move would be the 50% retracement level of the recent price drop, found at 564 ½. If we do not see the market reverse off this level the next upper target would be the resistance near the middle of the gap at 572 ½. If the uptrend is strong enough we might even see prices go on to re-test the recent high at 585 as well.

If the downtrend continues, look for beans to test the current support at 544. From here the market should decline to the next support level at 536 before finding the bottom of the large trading range at 530.

Thankya. Thankyaverymuch [insert Elvis impersonation here]

Cattle treated us VERY nicely last week by doing exactly as we predicted. The market held the current highs at 8200 and retreated from there to the first support level at 7940 getting as low as 7930 before settling in for the remainder of the week. This little move was worth about $750 per contract, depending on where you exited the trade.

The long term charts show cattle completing a very large, two year rounded bottom formation with the market bouncing off the neckline. Furthermore, this is normally the time of year that we see cattle prices decline before turning higher in late winter/early spring. While it appears that cattle is intent on heading lower over the next longer term, next week might actually see prices rally a bit as traders holding long positions look for a chance to cut their losses.

A pullback rally will likely see prices test the first support level at 8070 before possibly reversing and heading lower. Once below the current support at 7930 the bear market should continue to the next support level at 7835 before encountering the recent lows at 7710. Below here the market will run into long term support at 7600 before testing the 38% retracement at 7567.

While all indications are that cattle will head lower, if we do see the bulls regain control of the market look for prices to continue above the 8070 resistance to re-test the current contract highs at 8200. Above here the next resistance levels would be at 8270, 8360 and eventually 8430; however at the moment this does not seem to be a likely scenario. Remember that any bullish rally will require increasing volume otherwise it will be short lived.

Next week we will turn our attention to the April contract.

Cocoa continued to thrash about in the smallish trading range from last week. The market is currently close to testing the top of the range at 2200; however by all indications the market setting up to head lower in the future. The 2200 resistance is fairly substantial by long term standards and the market will require a boost in momentum if it is going to get beyond that barrier. For those of you who like to trade divergences, the 14 day RSI is showing a divergence in the uptrend, which also hints that prices might be heading lower soon.

On the off chance that the market does clear the 2200 resistance level, look for a convincing close above resistance before trusting prices to go higher. Above 2200 we can next find resistance at 2247 and 2310 before encountering the contract highs at 2394.

Next week will likely see prices head lower however. There is an opportunity to short the market below Friday’s low with prices likely to head to the bottom of the trading range at 2055. A close below here will likely see prices continue lower to the support at 2008 and if prices continue to slide, to the next support at 1965 as well. Below here there does not appear to be too much to keep the market from finding the 50% retracement at 1927.

While sugar traded nicely within the symmetrical triangle formation for most of last week, by the end of the week we got a rather surprising bullish breakout from the formation. I say it was surprising since this is normally the time of year that we see sugar prices making a severe decline and not advances!

Although the market made a very convincing breakout from the triangle formation, the only real flaw was that sugar failed to close above the previous highs, thereby introducing some doubt as to the strength of the breakout. As a rule however, when you have a triangle formation trading near contract highs it is usually wise to wait until the market proves it can get past the old highs before committing to it with a contract.

Therefore while we have a bullish break out of the triangle, and a subsequent continuation of the uptrend (a good thing), the real test for the market will be closing above current highs. Once the market is above here we should see it continue to the next resistance level at 810 and the long term 50% retracement at 820. If the breakout of the triangle holds true we should eventually see sugar trading near the resistance at 850.

Some traders might see the current formation as a rounded bottom formation, or a double top. If this is the true formation then we might see prices retreat from the current high of 794 and test the first support level at 755. Below here the market should find more support at 730 and 715 followed by the 62% retracement level at 690.

After pausing briefly last week, the Swiss Franc continued to rally posting a new contract high before the end of the week. The market seems to be enjoying a strong bull run at the time of year that we normally see contract lows. Nevertheless the continued threat of war in the Middle East continues to make the Franc a popular market at this time and we can likely expect higher prices again next week.

The market is fast approaching long term resistance at 7380 which might cause the market to pause again; however a decisive close above this level would signal that the bulls are still in control and we could expect prices to continue higher to the next resistance at 7455.

If the bulls encounter problems at the nearby resistance look for the market to pullback and test recent support at 7185. While it does not seem likely at this point, if prices continue to decline below here look for added support at 7127 followed by the 62% level at 7085. If this does not stop a falling market we could see a full 50% retracement at 7008.

Silver seems to have completed a bullish pullback the middle of last week finding support at 472 before prices reversed and continued higher. The market is currently up against some long term resistance around 485; however silver is currently in a fairly stable uptrend and therefore we should see prices continue higher next week.

Clearing the resistance at 485 would be a definite buy signal and should see prices test the recent high at 494.50. Once above here the market finds more resistance nearby at 503 and again at 507.50 before it encountering resistance near the contract high at 517.

If the uptrend falters and is unable to clear the 485 resistance look for a declining market to find support at 472 and the nearby 62% retracement at 470. If the market continues to decline from here it will should find support at 465 before running into the 50% retracement at 462.25.

While it is not necessary to have a favourite market, most traders usually end up choosing a few that they are most comfortable with and follow their grouping of markets week in and week out. Frequently there is a debate amongst traders whether it is better to become an expert in one or two markets, or whether it is better to take advantage of the best formations in a wide range of markets.

There is no right answer to this question. Each trader has to experiment with different markets to choose which strategy they think will work best for them; however since we are always trying to make this a better ezine for you, I think we will use this subject as the question for this week’s survey:

Do you like the current format of the ezine, where we review the same markets every week, or would you prefer to see a variation in the markets we cover every week?

Can you exercise an option at any time or do you have to wait until the day the option expires? Also, if you do exercise the option, do you have to put up margin at that time?

While there are a few exceptions, you can usually exercise your option into a futures contract anytime during the life of the option, or on expiration. You would normally only exercise the option if it is trading in-the-money, otherwise it will cost you money to exercise it, which kind of defeats the purpose of exercising the option in the first place.

If you are holding an in-the-money option on expiration, it is normally filled into a futures contract for you. If you do exercise the option you will be required to pay margin, just like for a regular contract; however, it is very unlikely that you will ever want to exercise an option.

There is no real advantage to be had by exercising an option. Rather, in most cases you would most likely bank profits (or cut your losses as the case may be) just as though you were trading a regular futures contract. Unless you are planning very long term trades, or are a commercial buyer, it is unlikely that you will want to hold onto any trade (option or contract) for more than a few weeks, unless of course the market is really exploding.

Erich