The Trader Daily

 | Aug 13, 2014 | 7:30 AM EDT
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I generally don't devote much time to trading the agriculture futures (corn, soybeans and wheat), but the scope of Tuesday's bullish reversal in the December corn contract did catch my eye. Before going any further, please note that the most liquid corn-related ETF is the Teucrium Corn ETF (CORN). If you're an equities-only trader and interested in either trading or tracking corn, I'd suggest you add CORN to your screen. And just so there's no confusion, the stated goal of the Teucrium CORN fund is to "reflect the daily changes in percentage terms of a weighted average of the closing settlement prices for three futures contracts for corn."

As you review the volume profile chart below, it's important to recognize that while Tuesday's reversal was undeniably bullish, the contract is still navigating a three-week long balance area. The balance area I'm referring to stretches from approximately 363.50 to 375. And in order to trigger a genuinely bullish break, we'd need to see the contract drive through the 377 -- 379 low volume area (highlighted in yellow on the chart). In more simplistic terms, I'd expect a close above 378 to trigger upside continuation toward 385 and 391.


December Corn Futures
Source: eSignal


A close beneath 360 -- 361 would leave the bulls vulnerable to another leg lower. So clearly I'd have no interest stalking corn futures or the Teucrium Corn Fund on the long side if the December corn contract closed beneath 360.

Moving on to Wednesday's E-Mini S&P 500 futures (Es) auction, we're still in the same general condition that we've been in for the past couple days. Traders continue to auction the upper region of the lower balance area on the composite profile. As discussed over the past couple days, two-way rotational trading conditions should be anticipated until the contract breaks above the low-1940s (a minimum of one 30-minute bar close above 1942/1943), or beneath 1902.25.

When you're studying the Es volume profile below, remember that price auctions from area of acceptance to another. Put another way, as long as the Es remains beneath the low-1940s, but above 1900 -- 1905, the odds will continue to favor two-way rotational trading. A break and 30-minute bar close above 1942/1943 would greatly increase our chances of a bullish trending auction toward the lower end of upper balance area (roughly 1962).


E-Mini S&P 500 Futures
Source: eSignal


Additional Notes:

  1. Being short duration, which I am via a long position in the Proshares Short 20+ Year Treasury (TBF), may appear to be a difficult trade. However, when you consider the close proximity of our stop, the building negative momentum divergences in the 30-Year bond and the fact that being short bonds at almost any point on a year-to-date basis has been a horrible decision (speaks to sentiment), I believe this is an ideal time to take a calculate gamble. If long TBF, I believe one's stop should be somewhere under $28. Whether one waits for a weekly close (which I am), or opts to cut the position after a single close beneath that figure, I think we can agree that the trade risk is manageable.
  2. Ever since Achillion Pharmaceuticals (ACHN) traded from under $3 to above $7 in the span of two days (back in early June), I've had my eye on the stock for some sign of bullish continuation. Keeping in mind that this is a trade and not a play on any forthcoming drug trial data, my baseline view is that a push above $7.93 -- $8.06 would favor a break to new swing highs (above $8.61). Based on Tuesday's close, I'd suggest conservative traders would not want to see the stock close beneath $7.33. That said, the stock doesn't suffer a bearish break from composite balance until it closes beneath $6.25.


Achillion Pharmaceuticals (ACHN)
Source: eSignal


Any trading or volume profile related questions can be posted in the comments section below, emailed to me at or posted to my twitter feed @ByrneRWS

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