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Tightening Stops on Synthetic Oil

5/10/2017

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The synthetic oil position which I recommended very early yesterday (I worked on it until 1:30 yesterday morning) is up pretty good today.  If you took the position yesterday afternoon, you probably got an even better fill than the one I posted at $48.  Oil is up 3% today as I write this at $49.25. 

​When I recommended the trade, I had a very loose stop placed at $46.90.  I am being cautious here, but I am recommending increasing this stop to just below yesterday's low at $47.60.    $49.5 will be the first resistance area oil meets.  Should oil break through this level, the next resistance will be at $52.5 at the 200 day moving average.
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When I recommended the trade, my enthusiasm was somewhat muted due to higher sentiment than I really wanted.  I wanted this trade in case I was wrong and we were beginning a new intermediate cycle because the gains can be so big.  Moving the stop to $47.60 limits the loss to $400 should I be wrong. 

​What I am leery of is that the market could hit resistance and trapped longs take advantage and sell, pushing prices lower.  There is a lot of overhead resistance in oil right here, going back to the August low.  What I don't want to happen is that oil bounces lower off this resistance and drop to last summers low around $46. 
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When/if oil hits $50, I plan to increase stops again locking in some gains.  Again, if the market is moving into a new yearly cycle, prices out of this daily cycle should reach $56.  That will be an $8,000 gain per oil contract.
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Steve Wade and Tyler Wade of Wade Assurance are associated persons for AgDairy LLC.

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The risk of loss in trading commodity futures contracts can be substantial.  You should, therefore, carefully consider whether such trading is suitable for you in light of your circumstances and financial resources.

Wade Assurance is an equal opportunity insurance provider.
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