Commodity Trading Ideas: March 2017

Date of analysis: March 11, 2017

Every two or three weeks I search for commodity spreads with high probability of potential profit. First I apply filter with around 20 criteria on thousands of combinations of trading setups. And then I do detail analysis on every filtered spread. The goal of detail analysis is to filter out less stable spreads and keep the best ones. Usually I find two or three favorite candidates and some less preferred.

In this post I am going to publish high probability trading setups as the result of my analysis which I consider to trade in March.

Buy Lean Hogs: HEQ17 – HEN17

long August 2017 Lean Hogs and short July 2017 Lean Hogs

Computer optimized entry date is March 18th (green vertical line in chart). I do not strictly enter at this date, I am waiting for price action signal few days before or after this date. Optimized exit date is April 7th (red vertical line), but again for me it is just approximate date of exit. I exit in accordance with my exit conditions. Blue vertical chart at the end is warning about the approaching expiration (FND).

Seasonality plays an important role in my trading system that’s why seasonal patterns are displayed in my charts. Every pattern with a different history (5y, 10y, 15y) has its own color. The correlation between Lean Hogs spread and seasonal patterns within last 15 years is higher than 60%.

In last 15 years there were 87% winning trades with average profit around 200 USD per contract. Another spread HEN17- HEM17 with optimized entry date at the beginning of April is in game as well.

(click on image to enlarge in new window)commodity trading idea seasonal futures spread lean hogs heq17 hen17

Buy Copper: HGN17 – HGK17

long July 2017 Copper and short May 2017 Copper

March 14th is the day of optimized entry where I’ll expect the beginning of seasonality. Entry into position has to be confirmed with price action signal.

  • Spread is moving in similar way as seasonality patterns 5y, 10y, 15y and 20y and is correlated (80%) with 2013 year.
  • Current price level compared to the history is quite high.
  • Alternatively HGU17 – HGK17 is tradable as well.

(click on image to enlarge in new window)commodity trading idea seasonal futures spread copper hgn17 hgk17

Buy Hard Red Wheat: KEN17– KEK17

long July 2017 Hard Red Wheat and short May 2017 Hard Red Wheat

March 15th is the day of optimized entry. I am waiting when price breaks SR level at price 12, this will be the signal to enter into long position.

  • Correlation between analysed spread and seasonal patterns is almost perfect = 90% within last 20 years.
  • Price behaved similarly in years 2016, 2015, 2012, 2010 with correlation more than 80%.
  • In last 15 years there were 87% winning trades.
  • Current price level compared to the history is quite high.

(click on image to enlarge in new window)commodity trading idea seasonal futures spread wheat ken17 kek17

Less favorite but still on my radar

There were some reasons for dissatisfaction during my analysis or backtests with following spreads but they are still tradable and remain in my watch list:

  • Buy ZLZ17 – ZLN17 (long December 2017 Soybean Oil and short July 2017 Soybean Oil)
  • Buy LEZ17 – LEV17 (long December 2017 Live Cattle and short October 2017 Live Cattle)

Please read the disclaimer.

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