Lean Hogs

Last Wednesday I was having a look at a possible "resistance becomes support" scenario in the February Lean Hogs.

In fact hogs have moved nicely off that level to become a textbook example of this nuance of price action. The fib retracement traders will also be claiming this one as well as it is in the 50% retracement region that most look for. I'm hoping at this stage that price action holds up long enough to for this to be a textbook example... and anyone long some calls will appreciate that too. :)

Not withstanding that resistance often does often become support, I never have had a satisfactory answer as to why this happens. It's good enough for me that it just works as far as trading goes; but the vacant stare on my face is not a good look when someone asks me this very question.

Anyone with an answer? I'd be much obliged.

Lean Hogs - Resistance becomes Support?

Lean Hogs have sold off quite viciously from the highs of this month - a classic headfake out of consolidation and selloff, described as a train wreck by Jim Wyckoff.

I wouldn't go that far(yet) as this Feb Hogs chart looks far from bearish in my opinion. If Hogs get support here, it will be at a previous resistance level and at ~50% fib retracement. If this is just a retracement, then it is right here where we want to see support... or 63.77 at the lowest.

It's a tad early to call a long opportunity, but just a heads up. IV's are on the cheapish side so optioneers might be looking on the buy side of the equation.

Feeders - IV Breaks Out

Feeder Cattle Implied Volatility mean has made a 2 year high at over 21% yesterday on the back of some fairly serious tankage over the last 2 months.

There is something important to note here in that IV's were at 2 year lows two months ago also. Some sort of long vega strategy would have done very well if the direction was picked correctly or if delta was neutral. IV has doubled in that time.

The other thing to note at present is that though the Statistical Volatility is relatively high at 14%, this is substantially lower than the IV.

If a trader believes that the volatility on the underlying may peak about here, or even decline, a good case could be made for this being at, or close to an IV peak here. An ideal spot to go short vega, or in other words sell some option premium.

Looking at the price chart, a firm conviction of where price is headed (or not headed) would be required also. Not a lot of lead from the skews though.

Just a heads up. as ever do your own research

Gold Overtures at a Breakout

I am long Dec CBOT Gold, which I entered yesterday as a little swing trade inside this channel/triangle/consolidation zone thingy it's in. The thing with these trades is whether to take the profit at resistance (should it be kind enough to get to the line I have penciled in), or to watch and see if it breaks out. As I type this I'm watching volume kick up as price ticks over $600.

Potentially, I'll leave profit on the table in exchange for a chance at hitting one over the fence.

Hogs and Cattle are looking bullish too. No position, but wishing I was long and I'm looking for a lower risk long entry.