OJ rallying! Atkins craze over-the-top?
OJ prices are at last recovering a bit. Is this recent rally fundamentally based? Calendar spreads are not improving? Latest COT doesn't show any reduction of shorts by Commercials. Nevertheless, price = price = price and it is going up. Lets see were thius rally ends. My nov contract target is $68.
OJ prices are at last recovering a bit. Is this recent rally fundamentally based? Calendar spreads are not improving? Latest COT doesn't show any reduction of shorts by Commercials. Nevertheless, price = price = price and it is going up. Lets see were thius rally ends. My nov contract target is $68.
Attachments
Take a look at this article on OJ from Liberty Trading Gp website.
It outlines the case for a long-term recovery play (via put option selling below the recent lows)
Also contains some fundamental reasons for long-term recovery.
http://www.libertytradinggroup.com/info/gen78.html
It outlines the case for a long-term recovery play (via put option selling below the recent lows)
Also contains some fundamental reasons for long-term recovery.
http://www.libertytradinggroup.com/info/gen78.html
I found it!! Thanks
Frozen Orange Juice Could Offer Solid Option Selling Plays This Month
By: James Cordier
Liberty Trading Group
June 24, 2004
Frozen Concentrate Orange Juice prices have suffered from a double whammy of increasing supply and decreasing demand that has resulted in a steady grind lower in prices for almost two years. Orange Juice prices are currently at their lowest levels since 1977. This has some in the trade starting to sense a value play in Juice. With the fundamental tide possibly starting to turn, we think they may have something.
Before we can discuss why juice may be a value at current levels, we must first understand what has taken Orange Juice prices to such enticing lows.
We can start with Brazil. Like in many other agricultural commodities, Brazil has become the global superpower of the orange industry. Besides being the #1 provider of Orange Juice to the US, Brazil now dominates the markets outside the US, making exports of US Juice virtually non-existent. In addition, if it were not for a surcharge slapped on Brazilian juice coming into the US, many feel that the US orange juice industry could be almost wiped out entirely by Brazil. Talk of the US government reducing or repealing this surcharge entirely has many Florida Citrus growers very nervous.
Large US supply has also dogged prices. Florida growers produced a record crop of 245 million boxes of oranges this year. This represents a 17 percent increase over the 02/03 crop and will yield about 1.5 billion gallons of orange juice. This new orange juice is coming into the supply pipeline at a time when storage supplies are already high.
Unlike California oranges which are used primarily as table fruit, Florida oranges are used almost exclusively for juice, accounting for 97% of all US orange juice production.
Possibly the most daunting development for OJ prices in the last 24 months has been the blow demand has taken since a man named Dr. Atkins named Orange Juice as a top enemy of weight watching carb counters. With popular low carb diets such as Atkins and South Beach advising followers to avoid carbohydrate-laden orange juice, annual per capita consumption has fallen from nearly six gallons in the late 1990's to below five gallons today.
This is why storage supplies increased last year even when harvest numbers were lower.
These are the factors that have brought juice to its current levels. However, with OJ prices still hovering near 27 year lows, the market may have finally done it's job of pricing in these fundamentals. Nothing cures low prices like low prices. And juice may have finally hit a price level that could be considered too low.
In addition to trading at historically cheap prices, some of the fundamentals that brought juice to these values may be turning back in OJ's favor. The Florida Department of Citrus has launched a counter-attack against low carbohydrate advocates in the form of a $7 million dollar advertising campaign touting the health benefits of Orange Juice. The industry itself has responded vigorously as well, rolling out several low carbohydrate, low calorie versions of their traditional product that promises to rejuvenate OJ sales in supermarkets nationwide.
Future harvests may begin to recede as well. A bacterium called citrus canker has led to the felling of 2.2 million trees in commercial orange groves in Florida. In addition, the ever fiercer competition for land and water in the state of Florida as a result of exploding population growth has caused land values to skyrocket. Many growers are being tempted to sell all or portions of their groves to developers willing to pay monumental prices for prime real estate.
As far as meddling with the surcharge on Brazilian juice, don't count on it, at least this year. Both candidates for the presidential election realize the importance of the I-4 corridor (the citrus belt) in regard to swaying the states electoral vote. It is unlikely either candidate would approve a mandate that would virtually decimate the Florida Citrus industry, but it is almost a certainty that Bush would not approve it in the months prior to the election.
Although these factors may not have an immediate impact in raising the price of FCOJ, we feel that orange juice may have achieved a long term low last month. Although there is always the possibility that these lows could be revisited in the coming months, we now believe that the path of least resistance is up, considering that the market appears to have priced in the worst of the fundamentals. In other words, when you're at the bottom, things can only get better and they now appear to be heading in that direction.
In addition, FCOJ prices may now begin to benefit from normal seasonal factors as well. As the Florida citrus season officially ends in June, much of the hedge pressure from commercials should begin to lift, easing the way for prices to rebound.
Orange Juice then, appears to be at a good value at current levels. We are recommending put sales beneath last month's lows as an excellent way to take advantage of these price levels. Put sellers can profit even if the market does not move higher. As long as prices remain above the strikes sold, the options will eventually expire worthless and the put seller will profit.
We will be working closely with clients in the coming weeks in selecting and selling option premium beneath the Orange Juice market.
If you would like more information about option selling in futures or establishing an account based on this approach to the market, please feel free to call.
James Cordier
Michael Gross
James Cordier is head trader and president of Liberty Trading Group, a registered CTA and futures brokerage firm specializing in option writing on commodities. James' market comments are published by several national financial publications and worldwide news services.
Frozen Orange Juice Could Offer Solid Option Selling Plays This Month
By: James Cordier
Liberty Trading Group
June 24, 2004
Frozen Concentrate Orange Juice prices have suffered from a double whammy of increasing supply and decreasing demand that has resulted in a steady grind lower in prices for almost two years. Orange Juice prices are currently at their lowest levels since 1977. This has some in the trade starting to sense a value play in Juice. With the fundamental tide possibly starting to turn, we think they may have something.
Before we can discuss why juice may be a value at current levels, we must first understand what has taken Orange Juice prices to such enticing lows.
We can start with Brazil. Like in many other agricultural commodities, Brazil has become the global superpower of the orange industry. Besides being the #1 provider of Orange Juice to the US, Brazil now dominates the markets outside the US, making exports of US Juice virtually non-existent. In addition, if it were not for a surcharge slapped on Brazilian juice coming into the US, many feel that the US orange juice industry could be almost wiped out entirely by Brazil. Talk of the US government reducing or repealing this surcharge entirely has many Florida Citrus growers very nervous.
Large US supply has also dogged prices. Florida growers produced a record crop of 245 million boxes of oranges this year. This represents a 17 percent increase over the 02/03 crop and will yield about 1.5 billion gallons of orange juice. This new orange juice is coming into the supply pipeline at a time when storage supplies are already high.
Unlike California oranges which are used primarily as table fruit, Florida oranges are used almost exclusively for juice, accounting for 97% of all US orange juice production.
Possibly the most daunting development for OJ prices in the last 24 months has been the blow demand has taken since a man named Dr. Atkins named Orange Juice as a top enemy of weight watching carb counters. With popular low carb diets such as Atkins and South Beach advising followers to avoid carbohydrate-laden orange juice, annual per capita consumption has fallen from nearly six gallons in the late 1990's to below five gallons today.
This is why storage supplies increased last year even when harvest numbers were lower.
These are the factors that have brought juice to its current levels. However, with OJ prices still hovering near 27 year lows, the market may have finally done it's job of pricing in these fundamentals. Nothing cures low prices like low prices. And juice may have finally hit a price level that could be considered too low.
In addition to trading at historically cheap prices, some of the fundamentals that brought juice to these values may be turning back in OJ's favor. The Florida Department of Citrus has launched a counter-attack against low carbohydrate advocates in the form of a $7 million dollar advertising campaign touting the health benefits of Orange Juice. The industry itself has responded vigorously as well, rolling out several low carbohydrate, low calorie versions of their traditional product that promises to rejuvenate OJ sales in supermarkets nationwide.
Future harvests may begin to recede as well. A bacterium called citrus canker has led to the felling of 2.2 million trees in commercial orange groves in Florida. In addition, the ever fiercer competition for land and water in the state of Florida as a result of exploding population growth has caused land values to skyrocket. Many growers are being tempted to sell all or portions of their groves to developers willing to pay monumental prices for prime real estate.
As far as meddling with the surcharge on Brazilian juice, don't count on it, at least this year. Both candidates for the presidential election realize the importance of the I-4 corridor (the citrus belt) in regard to swaying the states electoral vote. It is unlikely either candidate would approve a mandate that would virtually decimate the Florida Citrus industry, but it is almost a certainty that Bush would not approve it in the months prior to the election.
Although these factors may not have an immediate impact in raising the price of FCOJ, we feel that orange juice may have achieved a long term low last month. Although there is always the possibility that these lows could be revisited in the coming months, we now believe that the path of least resistance is up, considering that the market appears to have priced in the worst of the fundamentals. In other words, when you're at the bottom, things can only get better and they now appear to be heading in that direction.
In addition, FCOJ prices may now begin to benefit from normal seasonal factors as well. As the Florida citrus season officially ends in June, much of the hedge pressure from commercials should begin to lift, easing the way for prices to rebound.
Orange Juice then, appears to be at a good value at current levels. We are recommending put sales beneath last month's lows as an excellent way to take advantage of these price levels. Put sellers can profit even if the market does not move higher. As long as prices remain above the strikes sold, the options will eventually expire worthless and the put seller will profit.
We will be working closely with clients in the coming weeks in selecting and selling option premium beneath the Orange Juice market.
If you would like more information about option selling in futures or establishing an account based on this approach to the market, please feel free to call.
James Cordier
Michael Gross
James Cordier is head trader and president of Liberty Trading Group, a registered CTA and futures brokerage firm specializing in option writing on commodities. James' market comments are published by several national financial publications and worldwide news services.
Trading Places revisited!!
Do you recall Eddie Murphy tanking the OJ market in Trading Places?
Considering the retracement in past 2 days was >75%, one can probably conclude that the May-July rally was a wave 4 bounce as opposed to wave 1 of new bull market. Clearly, there has been a lot of speculative buying in past 2 months which appears not to be supoorted by fundamentals as perceived by Commercials who had steadily build a net short position in past month. Anyway, great all that hindsight. I am glad I did get out, admittedly too early at avg of 67.80 but better than current pain.
What's next? A lot mor e downside?
If W1 = W1-3 => 59 but
if W5 = 1.618 x W1-3 ==> 54-55.
I suspect the latter. Arguments:
- How many speculators were able top offload their longs in past 2 days?
- Realisation that fundamentals (eg supply - demand) haven't changed for the better, etc
How to trade it? Well, I wish I knew. Probably better to stay away while locals and insiders take back control.
Keen to hear your views?
Do you recall Eddie Murphy tanking the OJ market in Trading Places?
Considering the retracement in past 2 days was >75%, one can probably conclude that the May-July rally was a wave 4 bounce as opposed to wave 1 of new bull market. Clearly, there has been a lot of speculative buying in past 2 months which appears not to be supoorted by fundamentals as perceived by Commercials who had steadily build a net short position in past month. Anyway, great all that hindsight. I am glad I did get out, admittedly too early at avg of 67.80 but better than current pain.
What's next? A lot mor e downside?
If W1 = W1-3 => 59 but
if W5 = 1.618 x W1-3 ==> 54-55.
I suspect the latter. Arguments:
- How many speculators were able top offload their longs in past 2 days?
- Realisation that fundamentals (eg supply - demand) haven't changed for the better, etc
How to trade it? Well, I wish I knew. Probably better to stay away while locals and insiders take back control.
Keen to hear your views?
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FetteredChinos
Veteren member
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hmmm, looks like my equity curve.....
FetteredChinos
Veteren member
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well partly that lol..
also moved onto forex. lot easier to trade, and less hair-raising....
good to see you back, bg
FC
also moved onto forex. lot easier to trade, and less hair-raising....
good to see you back, bg
FC
ORANGE JUICE -
News reports suggest that Floida's citrus industry has been ' devestated' by Hurricane Charley, uprooting treees and tearing down fruit.
The market surely must adjust to the possibility of decreased supply for the coming season.
Next few days should be interesting. Limit-up days? Or wait for confirmation of damage?
News reports suggest that Floida's citrus industry has been ' devestated' by Hurricane Charley, uprooting treees and tearing down fruit.
The market surely must adjust to the possibility of decreased supply for the coming season.
Next few days should be interesting. Limit-up days? Or wait for confirmation of damage?
Hi Dave T - I casually read thru this thread today and thought I'd check out the recent chart to finds out how the story ended. . . . did you manage to profit from the fundamental news? Hope you did but never possible in my experience . . . I wouldn't usually ask such a daft question but your previous post seemed to hint that there could be a delay whilst the market absorbed the impact of this news - I wondered this was a perculiarity of the softer/agro commodities. ??
As always any advice is much appreciated - cheers
That OJ chart is now looking very hysterical don't you think - presumably the extra demand is to replace the Florida supply that would usually be sold domestically?
As always any advice is much appreciated - cheers
That OJ chart is now looking very hysterical don't you think - presumably the extra demand is to replace the Florida supply that would usually be sold domestically?
Hello fastnet -
No, actually, I haven't traded this market - I almost bought some calls after the big sell-off a few weeks ago (prior to the hurricane hitting) - which would be looking quite good now...
Sometimes there can be a delayed reaction, to shock events (before damage estimates/ anecdotal evidence start filtering through) although usually there is a knee-jerk reaction first, then a period of higher-than-usual volatlilty as bulls and bears 'lock horns', (waiting for confirmation) then follow-through if the original fears are justified.
One thing I often notice, in many of the commodities, is the tendency of the market to 'anticipate' some as-yet seemingly unknown 'event'. This phenomenon has been scientifically studied in futures markets, (eg used in the Pentagon's once-considered 'terror futures')
Take the OJ market recently. The market bottomed and rallied sharply in July (then sold off). Looked at on the monthly chart, it looked like a pre-cursor to a longer-term rally, which would have to be triggered by some supply shock, albeit then beyond forecasting.
Look at Crude Oil, this week - The market topped technically (with a key reversal on the daily) and dropped sharply, ANTICIPATING today's news of an end to the Najaf fighting?
Last December, (03) the Cattle market had already begun to fall BEFORE the Mad-Cow showed up on Dec 24th!
To go back to Orange Juice, to profit from this current scenario, I would have bought the market at the recent lows on a VALUE basis (with the awareness that the previous sharp rally was trying to 'tell me something')
Bottom line, though - I wasn't there.
No, actually, I haven't traded this market - I almost bought some calls after the big sell-off a few weeks ago (prior to the hurricane hitting) - which would be looking quite good now...
Sometimes there can be a delayed reaction, to shock events (before damage estimates/ anecdotal evidence start filtering through) although usually there is a knee-jerk reaction first, then a period of higher-than-usual volatlilty as bulls and bears 'lock horns', (waiting for confirmation) then follow-through if the original fears are justified.
One thing I often notice, in many of the commodities, is the tendency of the market to 'anticipate' some as-yet seemingly unknown 'event'. This phenomenon has been scientifically studied in futures markets, (eg used in the Pentagon's once-considered 'terror futures')
Take the OJ market recently. The market bottomed and rallied sharply in July (then sold off). Looked at on the monthly chart, it looked like a pre-cursor to a longer-term rally, which would have to be triggered by some supply shock, albeit then beyond forecasting.
Look at Crude Oil, this week - The market topped technically (with a key reversal on the daily) and dropped sharply, ANTICIPATING today's news of an end to the Najaf fighting?
Last December, (03) the Cattle market had already begun to fall BEFORE the Mad-Cow showed up on Dec 24th!
To go back to Orange Juice, to profit from this current scenario, I would have bought the market at the recent lows on a VALUE basis (with the awareness that the previous sharp rally was trying to 'tell me something')
Bottom line, though - I wasn't there.
Interesting stuff . . . . I have pondered this before but in less depth and only in passing . . . I suppose the statisticians would argue that we review the chart after hearing the news and transpose one on top of the other - we perceive the charts to reflect the news or even to forecast the news in this case. . . . anyway getting a bit off topic as many mathematicians have tried and failed to find any statistical proof in TA and explain the devotion of those that use it as ad hoc rationalisation. I'm still a believer. . . . interesting though - I have Charles McKay's book Popular Delusions and the Madness of Crowds beside my bed in case I can't sleep ;-). . . last might I started tucking into ''The Alchemists'' - there are parallels between that and TA I have to admit. . .
BTW Dave T - do you know of any good ''commodities'' type books that I might pick up in Waterstones this afternoon - I'm off to Italy for a fortnights holiday tomorrow morning and wanted to take a trading type book to counter act the effects of Dan Browns latest!! Could be hard (technical and specific) or soft (psychology/bio etc) -
Cheers
BTW Dave T - do you know of any good ''commodities'' type books that I might pick up in Waterstones this afternoon - I'm off to Italy for a fortnights holiday tomorrow morning and wanted to take a trading type book to counter act the effects of Dan Browns latest!! Could be hard (technical and specific) or soft (psychology/bio etc) -
Cheers
Fastnet -
Commodities books...
Most of the books I've read thus far have been general futures/TA oriented, but :
'THE 21 IRREFUTABLE TRUTHS OF TRADING ' by John Hayden has a commodities slant AND has plently of good trader psychology content.
My next read will probably fit the bill (available at T2W Store) which is :
TRADNG BY THE BOOK by Joe ROSS.
Not sure if you will find them at Waterstones, but you might be lucky.
Or try www.global-investor.com
Commodities books...
Most of the books I've read thus far have been general futures/TA oriented, but :
'THE 21 IRREFUTABLE TRUTHS OF TRADING ' by John Hayden has a commodities slant AND has plently of good trader psychology content.
My next read will probably fit the bill (available at T2W Store) which is :
TRADNG BY THE BOOK by Joe ROSS.
Not sure if you will find them at Waterstones, but you might be lucky.
Or try www.global-investor.com
Trading Places revisted #2
OJ is an Interesting market but riskaverse traders should probably stay out.
1. Since may bottom at 5900 (basis Nov contract), prces rallied on fund buying to 7300,
2. Than crashed when traders realised that supply was ample and funds and small speculators were playing a Ponzy scheme, however
3. Last month's Hurricane Charley created some havoc taking prices back up to 7500, and
4. before the market could make up the balance on the implications on supply and demand concern about Hurricane Frances rallied prices another 10cts to 8500 (todays' highs).
As I count this last leg up as possibly wave 5 of 3rd wave, i took profit on 1/2 position (+9 1/2pts) and tightened stop to just below yesterdays' highs. This is/was a lucky punt.
I am out of depths. To what extent are OJ prices overreacting considering the supposedly sizeable stocks, especially in the front month? Calendar spreads seem to be tightening a little, sign that speculators are piling in and commercials selling? Isn't Frozen OJ storable and redeliverable?
Keen to hear if other traders' can provide insight in outlook based on OJ chart and/or fundamentals? Are there informative websites for OJ news?
Thanks
OJ is an Interesting market but riskaverse traders should probably stay out.
1. Since may bottom at 5900 (basis Nov contract), prces rallied on fund buying to 7300,
2. Than crashed when traders realised that supply was ample and funds and small speculators were playing a Ponzy scheme, however
3. Last month's Hurricane Charley created some havoc taking prices back up to 7500, and
4. before the market could make up the balance on the implications on supply and demand concern about Hurricane Frances rallied prices another 10cts to 8500 (todays' highs).
As I count this last leg up as possibly wave 5 of 3rd wave, i took profit on 1/2 position (+9 1/2pts) and tightened stop to just below yesterdays' highs. This is/was a lucky punt.
I am out of depths. To what extent are OJ prices overreacting considering the supposedly sizeable stocks, especially in the front month? Calendar spreads seem to be tightening a little, sign that speculators are piling in and commercials selling? Isn't Frozen OJ storable and redeliverable?
Keen to hear if other traders' can provide insight in outlook based on OJ chart and/or fundamentals? Are there informative websites for OJ news?
Thanks
Last edited:
Going long
Long OJ K5 at 8735, stop 8550, target >9350
OJ looks good.
1. Market has been trading above the price of the "bearish" crop report which is a bullish sign.
2. OI has been rising on the last move, and
3. formed a bullish ascending triangle
The price objective should be about 9500
Long OJ K5 at 8735, stop 8550, target >9350
OJ looks good.
1. Market has been trading above the price of the "bearish" crop report which is a bullish sign.
2. OI has been rising on the last move, and
3. formed a bullish ascending triangle
The price objective should be about 9500
Attachments
Bgold -
9500 looks acheivable to me.
For the longer-term fundamental situation, though, don't forget Brazill is a major producer and has the ability to offset the losses in Florida coused by the hurricanes.
Any short crop there (Brazil) however, and the fundamentals would turn very strong, obviously. Techncially, it does look like OJ made a secular low in August 2004, and the structure of the charts has turned bullish since then.
I must admit I have never traded OJ. I've always found better opportuities/set-ups elsewhere - there is always a first time though!
Talking of other markets , are you in on this Coffee Bull run I've been commentating on recently?
9500 looks acheivable to me.
For the longer-term fundamental situation, though, don't forget Brazill is a major producer and has the ability to offset the losses in Florida coused by the hurricanes.
Any short crop there (Brazil) however, and the fundamentals would turn very strong, obviously. Techncially, it does look like OJ made a secular low in August 2004, and the structure of the charts has turned bullish since then.
I must admit I have never traded OJ. I've always found better opportuities/set-ups elsewhere - there is always a first time though!
Talking of other markets , are you in on this Coffee Bull run I've been commentating on recently?
DaveT said:
Yes, I doo see the coffee seculare bull market but find it very difficult to trade using futures. An interim peak may be at hand.
I think a Primary degree third wave is underway from the August low. Either, the fourth of third wave should be either an expanded flat or a contracting triangle to alternate with the second wave and wave b of either pattern could be completing here. A wave c decline could carry prices at least back to the 10000 area (in a triangle).
An alternative wave count could see prices completing an initial advance from the August low that could be retraced by over half before the next upleg gets underway.
I might try a stab on the pullback.
bgold said:
Trade doesn't look as good as I thought. OJ appears to be trading in 3's, not exactly the impulsive character one would expect for prices to make the 9500 target.
Over long weekend (mid term break), I made a rookie mistake by not having a hard stop in. As result I was not stopped out. Hard stop now set at 8490 for 250pts risk
