Trading Sugar

Sugar is traded on the Intercontinental Exchange with the ticker symbol SB. The contract size is 112,000 pounds. Contract expiration months are March, May, July, and October. Sugar is considered a soft commodity in the same category as cocoa, coffee, and orange juice. Sugar is produced from sugarcane which accounts for about 75% of sugar production and sugar beets that make up the rest. Brazil is the world's largest sugarcane producer and Europe is the world's largest beet producer.

Weather should be watched in Brazil, India and the United States. Heavy rains, especially around harvest time, can cause crop losses to sugarcane, which may cause the price of sugar futures to move higher. Weather, political issues, the value of Brazil's currency, the real, ethanol production and other factors all need to be monitored for their impact on world sugar prices and trade. Hurricanes in the Caribbean, which can devastate sugarcane crops in the United States, Cuba and elsewhere around the rim of the Gulf of Mexico if they strike at harvest time, can also send sugar futures prices higher. The bulk of Brazil's sugarcane crop is harvested between March and December in the south, which accounts for about 90 percent of the country's output. Around 70 percent of worldwide sugar production is consumed in the country that produced it. Sugar futures tend to move higher at harvest time from September to December.

The increased production of ethanol from sugar in Brazil is a positive factor for prices to move higher over the long-term. Ethanol is generally available as a byproduct of sugar production. It can be used as a bio-fuel alternative to gasoline, and is widely used in cars in Brazil. As an alternative to gasoline, it may become the primary product of sugarcane processing, rather than raw sugar. If the price of crude oil moves higher, that should also support sugar futures prices giving ethanol product more incentive to produce bio-fuels. On the other hand, sugar has been subject to increasing competition from alternative sweeteners such as high-fructose corn syrup used in soft drinks and elsewhere.

A recent inflationary environment has caused nearly all commodity prices to rise to either record or near record highs. Sugar though seemed to hit it high early around January and has been on a slight downward trend since then. It seems though that it may be under priced at this time based on rising oil prices. If crude does hit its' projected price of $140 to $170 a barrel we will see sugar climb as well probably even to new highs. My long term prediction for sugar is to hit 50 cents a pound before the end of the year.

If you're interested in learning more about futures and options trading check out http://www.ctfutures.com

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Futures Trading Technical Analysis - Using Momentum Oscillators

The William %R

The William %R indicator was developed by a famous trader and author Larry Williams. This indicator attempts to measure market conditions and prices which are overbought or oversold.

The William %R line always falls between a value of 100 and 0. In a chart where the William %R is shown, there are two horizontal lines that represent 20% and 80% - an indication of overbought and oversold levels.

The William %R is a leading indicator. This means the William %R line either touches the top of 20% or the bottom at 80% before the price moves. At anytime the William %R line crosses the 20% or 80% levels, it is an indicator to either enter into a long or short position.

On the other hand, at anytime the line crosses the 80% bottom level, it is an indicator to enter into a long position.

The seemingly simple indicator is one of the most used indicators by traders due to it being consistent indicator in forecasting the market price movements.

The Relative Strength Index (RSI)

The Relative Strength Index (RSI) is a technical indicator classified as a momentum oscillator that measures the speed of price movements.

The RSI is typically used on a 14-day time frame and measured on a scale of 0 to 100. Within that scale there will a high level marked at 70 and a low level marked at 30. The RSI is one of the most simple and straightforward technical indicator to read.

When the RSI rises above 70, it is considered overbought and the trend will likely to be bearish. When the RSI dips below 30 it is considered oversold and the trend of the market will likely to be bullish.

Some traders use different time periods for the RSI. For example, shorter term traders will use the 9-day period RSI instead of the 14-day period and longer term traders may use the 12-day or 28-day RSI.

The Commodity Channel Index (CCI)

The Commodity Channel Index (CCI) is developed by Donald Lambert in 1980, which is an indicator used to identify a new trend, price extremes and trend strength in trading commodities. Presently, the CCI has grown to be used and applied to indices, ETFs, stocks as well as other securities such as currencies.

Similar to the Relative Strength Index (RSI), the CCI is also a momentum oscillator, which is used to identify overbought or oversold levels.

There are two levels in which the CCI uses:
• The +100 Level
• The -100 Level

The majority of CCI movement occurs between the +100 and the -100 level. Readings above the +100 level indicates an overbought condition and if the CCI crosses below the -100 level, it indicates an oversold condition.

A move that exceeds any of these levels shows an unusual strength or weakness of the market prices, thus being able to forecast the direction of a trend.

Once the CCI rises above the +100 level, it is a signal that the market will tend to be bullish; therefore traders will enter in a long position.

If the CCI dips below the -100 level, it is a signal that the market will tend to be bearish, thus, traders will enter into a short position.

Because CCI is a leading indicator, it is a preferred indicator by traders to identify bullish or bearish runs as well as key trend reversals.

Moving Average Convergence Divergence (MACD)

The Moving Average Convergence Divergence or known as MACD in short, is one of the most popular indicators used by technical traders today. It is developed by Gerald Appel in the 1960s and is deemed as a one of the simplest yet reliable indicators for traders today.

This indicator is used to identify changes and movements of the asset price direction, momentum and strength within certain duration.

Because the MACD is based on moving averages, it is known as a lagging indicator.

There are two lines which represent the MACD. The first line is called the MACD line and the second is known as the MACD signal line.

The MACD line is calculated by taking the 26-day period Exponential Moving Average and then subtracting the 12-day period Exponential Moving Average, for example, 26 EMA - 12 EMA.

The MACD signal line is a 9-day period Exponential Moving Average (9 EMA). When the MACD line crosses above the MACD signal line, it is often assumed that the trend will have a bullish tendency. When the MACD line crosses below the MACD signal line, it is assumed that the trend will tend to be bearish.

Sheim Quah writes for Oriental Pacific Futures, a Malaysia-based brokerage authorized to provide futures broking services to institution and private clients since 2007. OPF specializes in futures broking, particularly Crude Palm Oil Futures (FCPO) traded on Bursa Malaysia Derivatives. Head on to this futures broker website for more information.

Oriental Pacific Futures articles written and published by Sheim Quah may be reprinted, reposted or distributed free for educational purposes only on the condition that Oriental Pacific Futures, Sheim Quah and the Corporate Website link information ( http://www.opf.com.my ) are included. However, other organizations are invited to link to articles that are available in the public area of the Oriental Pacific Futures' Learning Resources website. No additional permission is needed for such a link.

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Using Volatility Indicators in Technical Analysis

The moving averages are lagging indicators (MA) that most traders both professional and novice, will have probably used at one time or another.

Although there are a number of MA indicators, the most common used are the Simple Moving Average (SMA) and the Exponential Moving Average (EMA).

In this article, we will focus on these two indicators which traders use as technical indicators to forecast market trend movements to make their decision in trading.

These moving averages will help identify:

1. Direction of a trend

2. Potential support and resistance levels.

The Simple Moving Average (SMA)

The SMA is an indicator used as a common indicator for trading. It is calculated by taking the closing price of the asset and adding it with a number of time periods, and then dividing it by the total of number of the time periods.

For example, let's say the last 5 days closing prices for Kuala Lumpur Index Futures (FKLI) are 1300, 1450, 1250, 1500 and 1550.

Thus, the 5-day SMA for FKLI is calculated as follows:

1300 + 1450 + 1250 + 1500 + 1550 / 5 = 1410

The way of looking at SMA is straight forward. If the simple moving average line is on an upward trend, it indicates a strong momentum of an upward trend.

If the SMA line is on a downward trend, it indicates a strong momentum downwards.

If the SMA line is neither up nor down, it indicates a weak momentum where the market is stagnant.

The momentum also builds if the shorter term SMA crosses over the longer term SMA.

The SMA can also be used as a support on an upward trend and also a resistance on a downward trend.

The con of using the SMA is that some regard it as a lagging indicator since it does not weight recent price movements. Thus some traders prefer to use the exponential moving average (EMA) which will be discussed below.

Exponential Moving Average (EMA)

The EMA is similar to the SMA just that more weight is given to the data. In this manner, the average is weighted to place emphasis on the most recent price action.

This is the reason why many traders prefer to use this indicator because of its ability to reduce lag between EMA crosses.

The EMA is read exactly like the SMA price movement where the upward trend of the EMA line indicates a strong upward trend momentum and vice versa.

Simple Moving Average (SMA) versus Exponential Moving Average (EMA)

There are distinct differences between these two indicators as discussed above and both of them have different functions as indicators.

Because the EMA has less lag, traders prefer to use this as a trend indicator.

However for SMA, it represents the true average for the entire time period. Thus, the SMA may be more suited to identify support and resistance levels.

Sheim Quah writes for Oriental Pacific Futures, a Malaysia-based brokerage authorized to provide futures broking services to institution and private clients since 2007. OPF specializes in futures broking, particularly Crude Palm Oil Futures (FCPO) traded on Bursa Malaysia Derivatives. Head on to this futures broker website for more information.

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Oriental Pacific Futures articles written and published by Sheim Quah may be reprinted, reposted or distributed free for educational purposes only on the condition that Oriental Pacific Futures, Sheim Quah and the Corporate Website link information ( http://www.opf.com.my ) are included. However, other organizations are invited to link to articles that are available in the public area of the Oriental Pacific Futures' Learning Resources website. No additional permission is needed for such a link.

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Forget My Refund Check - Give Me a Few Bushels of Corn Instead!

What in the world is going on with the global hunger for corn these days? It seems our need to grow corn for ethanol has other nations challenged, as they need that corn for food. Indeed, I guess we do here at home as well, and we probably need that water that is growing that corn for other crops as well. Who knows what's going to happen, maybe the price of food will inflate to a point all the people get skinny as they can no longer afford it here?

Yesterday, I was sitting in Starbucks talking with one of the usual suspects, or should I say fast-talking acquaintances who sits at home all day buying and selling stocks and commodities online, and we were discussing the commodities markets as of late; copper, gold, silver, wheat, pork bellies?, and of course corn, which appears to have taken flight on an bio-fuel powered jet aircraft. He is quite the joker and he said to me; "forget my refund check from the IRS, who cares if the government shuts down, just buy me a dozen bushels of corn and keep my refund check, I can make hay with that!"

Indeed, I was laughing my butt off until I stopped to think about the $750 per bushel price and realized he was talking about $9,100 based on today's price. Interestingly enough, there was an article in the Wall Street Journal the other day titled "High Corn Prices Appear to Be Here to Stay" published on April 9, 2011 and written by Andrew Peaple - and I must say in looking at the chart over the last 18 months in that article had me convinced that my acquaintance might actually be better off with corn rather than a refund, especially if he is wholly invested and the government shuts down due to budget debates and no refund checks go out?

Speaking of budget cuts and commodities the day before that in the WSJ there was another article titled; "Farm Subsidies: Sacred Cows No More" by Bill Tomson, Siobhan Hughes, and Tom Polansek which was making an interesting statement that the farmers were doing so well, they hardly needed subsidies to produce corn for ethanol, or their crops this year. Of course the South MidWest shows that the droughts continue, so agricultural commodities will rise, and the rest of the world is challenged with these supply and demand issues.

Indeed, I hope you will consider all this. Don't invest in commodities unless you understand the volatile game, and seek out a financial advisor to help you understand all the risks.

Lance Winslow is the Founder of the Online Think Tank, a diverse group of achievers, experts, innovators, entrepreneurs, thinkers, futurists, academics, dreamers, leaders, and general all around brilliant minds. Lance Winslow hopes you've enjoyed today's discussion and topic. http://www.WorldThinkTank.net - Have an important subject to discuss, contact Lance Winslow.

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Commodities Futures and Options Explained

With all of the buzz surrounding commodities these days you are probably wondering just how does a penny stock trader gain exposure to something as potentially disastrous as the commodities futures market.

What exactly are futures?

Growing up in an area dominated by agriculture I used to watch the lunchtime agricultural news with a mixture of confusion and curiosity. What exactly is a lean hog future? I remember my father explaining that from his perspective no hog on any farm he ever saw had much of a future. What on Earth is a pork belly and why would anybody buy a barrel of oil? It was all rather mysterious. The image I had in my mind's eye wasn't entirely incorrect.

In investment terms, a future is a contract between a supplier of a commodity and a buyer.

How on Earth does the Futures Market work?

Essentially the buyer and seller agree a settlement price or strike value, a price for a commodity which may or may not already exist fixed at a delivery date in the future.

The buyer agrees to pay the seller and take delivery of a commodity of a certain quality at a date in the future fixed by contract and the seller agrees to supply the commodity on that date at the strike price.

The Futures Market is all about betting

As future is essentially a bet between a buyer and seller about what the future market value of the commodity will be. Some futures may be settled in cash with no physical delivery but this is not always the case. With futures there is always the very real concern that a hapless speculator unable to find a buyer may actually have to take delivery of 15000 frozen pork bellies and 2000 barrels of North Sea crude.

Futures can be bought but can they be sold?

Futures contracts can be sold on by either party before the delivery date.

How does the buyer avoid actually taking delivery of a commodity?

A safer variation of the future is an option. Rather than binding the buyer to actually taking delivery, the option, simply gives the owner of the option or right to buy the commodity from the supplier at a date in the future for an agreed price. The seller is happy to sell short because they know they will at least get a predictable price no matter which way the market goes. If the value drops and the option isn't used then the seller still has the commodity to sell and the money they received from the holder of the option.

Options can be bought but can they be sold?

As with futures, the option can be sold before the delivery date, but the owner is not obliged to buy anything or take delivery of anything. That said the option does have a market value which the owner forfeits if the option isn't exercised.

How are futures and options traded?

Futures and options are traded in specialist exchanges and would not normally be something that an amateur penny stock enthusiast would be advised to tackle. The best way for a penny stocks investor to expose their portfolio to commodities is to look for companies which produce commodities.

Want to know more about how to avoid direct exposure to the ups and downs of the futures market? Would you lie to invest in commodities without filling the garage with pork bellies and barrels of crude oil? There is a a way to with the best penny stocks 2011.
Visit the best penny stocks site today!

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