The Softs Review
For the week of December 20th, 2010
By Pitguru Jurgens H. Bauer
Be back with the Soft market in the new week : the week of December 20th, 2010, just check out to see if there is anything new in Coffee, Cotton, Sugar and other soft markets during this special week!
As the year of 2010 comes to an end I am of the opinion that we haven't seen anything yet. Sure Cotton, Sugar and Coffee have had huge moves up this year, but I expect even more fireworks in 2011. Coffee broke into new high ground on Friday, and Sugar took off with another big gain, Cotton (at least the March contract) moved limit, and all look prepared for another boost upward. Coffee could pop to $2.50-$3.00, even though my objective of $2.30 is now within easy reach, I think it entirely possible we could see $2.50 soon, maybe even this week. In Cotton, the March/May spread suggests that demand is still great right now. Physical cotton is needed and needed sooner than later. So too sugar, whose weekly chart has me thinking that a much bigger move remains in the cards. And Cocoa, which I perceive as being undervalued in the complex, may be providing a superior buying opportunity with its recent pullback as reaction to Ivory Coast tensions are predicted to behave.
The downside will come (and I believe it will be vicious when it does), but that time is not now. Now looks to me like a time for bull markets. All in all it has been a big year of gains with several records established in 2010.Yet, I am willing to bet we haven't seen the end of higher prices among the soft complex and feel 2011 may be another big plus year.
For this holiday shortened week, covered calls may be a worthwhile strategy. Certainly outright Call Option may appeal for the limited risk factor, but premiums are expensive and costly for a reason. Volatility is a measure of the market's predictability and while I may predict higher prices on the horizon, attracting a willing seller comes at a larger price. Call spreads may be another choice, but with volatility so high and semi-vacation time with the holidays over the next couple of weeks, selling covered calls is my preference. Since selling covered calls is akin to selling synthetic puts, those with lower risk tolerance levels ought to consider buying downside puts as coverage. Just remember, they aren't cheap and tend to get hurt by decreasing volatility should prices move down.
Besides, soft market, check for other reviews on other futures markets to have a full view to make your trading plan at
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Before leaving, I would like to take this chance to wish you guys a Merry Xmas and Happy New Year!!! Good luck! |
