Iran Nuclear "no deal" and how it affects the energy sector along with review of entry and exit strategies.
In This Issue
From our friend Jim Wyckoff
I have received several email messages from my readers asking about how to best determine entry and exit strategies when trading markets. Here are just a few of their quotes:
"Though my success rate has been high, I am only breaking even financially, due to getting out too early in profit and letting my losses run too far."
"Many articles are written showing when and where to enter trades... but how many articles are written about "running" positions? Where to exit surely has to be the biggest key to trading success!"
"I would appreciate some advice or tips on how to and when to enter a market and when to exit."
Of course, if a trader knew exactly when to get into a market and when to get out, wouldn't trading be easy! But even the most successful traders in the world can't do that. The best they can strive for is to catch a bigger part of any move (trend) in the market, and then get out with a good profit before the market turns against them.
I've written past articles on trading with the trend and not against it, on the perils of trying to pick tops and bottoms, on support and resistance, and on letting profits run and cutting losses short, as well as trading the "breakouts." I won't repeat all those trading tenets here, but if you've missed some of my articles, drop me an email and I can attach some of them in an email to you.
In this article, I'll get more specific on entries and exits, and what to do if you are in a trade and are accumulating profits or absorbing losses.
First of all, if you are in a trade, you should already have a general plan of action in place, including potential entry and exit points, before you entered the trade. Certainly, you can alter your plan of action in the heat of battle, but you should not enter any trade without having a well-thought-out trading plan. Also in your trading plan you can have a few scenarios that could occur and what you would do if they did occur.
Click on image below to enlarge
The recent change in US policy in regards to the Iran nuclear deal defintely sent some shock waves into the enregy markets. While the pressure is mostly to the upside, volatility has picked up quite a bit and the market is acting a bit "funny"....
Daily chart of the unleaded gasoline market for your review below This chart was prepared using CQG Q Trader software, which you can demo for 14 days with realtime data.
More about the Iran Nuclear aspect below.
In 2012, Iran was the third largest exporter of Crude Oil: the Trading partners and daily avg export numbers were as follows: EU 450,000 B/D and Nearly 1 million B/D to countries on the Asian continent including but not limited to Japan, South Korea, India and almost half of that to China. Meanwhile, growing global concerns about Iran’s growing and active Uranium enrichment program led to a July 15 2015 deal.
JCPOA was instituted in July of 2015, came after years of tension over Iran's alleged efforts to develop a nuclear weapon. effectively lifting economic sanctions on Iran in exchange for a verifiable drastic reduction in it’s Uranium enrichment program. Fast forward to 2016, Iran, in conjunction with other OPEC nations, between November of 2015 and June of 2016 tripled crude oil exports in an effort to retake control of the oil market Driving US frackers underground as a successful result of the self-imposed glut. During this time, Iranian oil exports increased by 730,000 B/D to 1.7 million B/D. OPEC, then in 2017, successfully reduced crude oil exports to inflate the price of crude oil to increase receipts. Present day, the JCPOA deal has been revoked by the U.S. leaving the crude market in a state of nervous flux.
Meanwhile, analysts and traders are waiting to see how new US sanctions against Iran influence Iran’s oil export levels. Lower exports could mean lower production. Iran is a member of the Organization of Petroleum Exporting Countries. OPEC and other major producers are scheduled to meet in June on the 22nd in Vienna to review whether they will extend production-cut targets beyond 2018. Some analysts suggest the production-cut targets could end. Thomas Pugh, Capital Economic commodities economist, told the Wall Street Journal that, “If the re-imposition of US sanctions on Iran leads to a reduction in Iran’s oil output and exports, OPEC and its allies could exit the deal at the end of the year or even sooner…to prevent a supply shortage in the oil market.”
Unleaded Gasoline Specs
Hours ( Central Time): 5:00 PM previous day to 4:00 PM next day.
Margins: ( as of the date of this newsletter) $3100 initial, $2800 Maint.
Contract Size: 42,000 galons
Point Value: full point = $420 ( Example: 218.80 to 219.80 ). Min fluctuation is 0.01 = $4.2 ( Example: 218.80 to 218.81)
Some of the basic fundamentals to keep in mind when you are considering a trade in the Unleaded Gasoline as well as other energies:
1. Primary driver of Unleaded prices is the price of Crude Oil
2. Dates and times of important reports. Namely, Tuesday afternoon report (API) and the DOE report on Wednesday mornings at 10:30 Am EST
3. Weather and Seasonality
Our brokers here at Cannon will be happy to chat about the canadian dollar market, other currencies, options, futures spreads and much more! Feel free to contact us at any time.
Source: Moore Research Center, Inc.
|Date||Reports||Expiration & Notice Dates|
| 7:30 AM CDT - Export(ex-ag) & Import(ex-oil) Prices(Apr)
9:00 AM CDT - Mich Sentiment-Prelim(May)
|LT: May Eurodollar Options(CME)
Jun Coffee Options(ICE)
||LT: May Canola(CBT)
May Rough Rice(CBT)
May Mx Peso(CME)
May Lean Hogs(CME)
May Lean Hogs Options(CME)
| 7:30 AM CDT - Empire Manufacturing(May)
7:30 AM CDT - Retail Sales(Apr)
7:30 AM CDT - Retail Sales Ex-Auto(Apr)
9:00 AM CDT - Business Inventories(Mar)
9:00 AM CDT - NAHB Housing Market Index(May)
11:00 AM CDT - NOPA Crush
3:00 PM CDT - Net Long-Term TIC Flows(Mar)
3:30 PM CDT - API Energy Stocks
|LT: May Cocoa(ICE)
Jun Sugar-11 Options(ICE)
| 6:00 AM CDT - MBA Mortgage Applications Index
7:30 AM CDT - Building Permits & Housing Starts(Apr)
8:15 AM CDT - Capacity Util & Industrial Prod(Apr)
9:30 AM CDT - EIA Petroleum Status Report
2:00 PM CDT - Dairy Products Sales
|FN: May Lumber(CME)
LT: Jun Platinum Options(NYM)
Jun Palladium Options(NYM)
| 7:30 AM CDT - USDA Weekly Export Sales
7:30 AM CDT - Initial Claims-Weekly
7:30 AM CDT - Philadelphia Fed(May)
9:00 AM CDT - Leading Indicators(Apr)
9:30 AM CDT - EIA Natural Gas Report
3:30 PM CDT - Money Supply
|LT: Jun Crude Lt Options(CME)
| 2:00 PM CDT - Milk Production
||LT: May Coffee(ICE)
May Nikkei Options(CME)
May Russell Options(CME)
Jun Orange Juice Options(ICE)
|FN=First Notice, OE=Option Expiration, LT=Last Trade|
* Please note that the information contained in this letter is intended for clients, prospective clients, and audiences who have a basic understanding, familiarity, and interest in the futures markets.
** The material contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performances are not necessarily indicative of future results.
*** This is not a solicitation of any order to buy or sell, but a current market view provided by Cannon Trading Inc. Any statement of facts herein contained are derived from sources believed to be reliable, but are not guaranteed as to accuracy, nor they purport to be complete. No responsibility is assumed with respect to any such statement or with respect to any expression of opinion herein contained. Readers are urged to exercise their own judgment in trading!