Novice traders look for perfection whereas experienced traders look for performance.

- Joe Kellogg

VantagePoint Trading Software gives you the edge you need

February 12, 2008

REVERSAL DATES FOR THE WEEK of February 11, 2008

MONDAY -- British Pound
TUESDAY -- Wheat, Soybeans, Bonds, Dow
WEDNESDAY -- Crude Oil, Heating Oil, Cocoa
THURSDAY -- Australian Dollar
FRIDAY -- Euro Currency

CURRENT RECOMMENDED POSITION

MARKETS TO WATCH:

1-MARCH WHEAT - Hit the Target! -- Early last week, I said the RDTI projected a run to the reaction line at $11.25 on or before Tuesday’s projected reversal date. At the time, $11.25 seemed a long way away, but since then, the Wheat has not only reached the target, it quickly reversed and sold off sharply. I find this impressive because the RDTI is pattern-based and had no knowledge of a short squeeze, but I still identified a major move. At this time, I will stand aside and wait for the next pattern to unfold after Tuesday’s reversal date.

2-MARCH BRITISH POUND - In the last couple of updates, I talked about a possible TR pattern developing in the BP. I was waiting for the market to dip into the buy window (1.9520 to 1.9390) and then reverse. Didn’t happen. Instead, the market continued lower and closed outside the low end of the buy window. (That is why you should always wait for the confirmation pattern before entering a trade.) This price action suggests the BP should continue lower and make a new low in the next couple of days.

3-MARCH SILVER - The bullish TC pattern continues to project higher prices as the Silver closed 33 cents higher on Friday. The TC pattern projection is still suggesting a run at $17.80 or higher before the end of the cycle.

4-MARCH CORN - The market surged to a new contract high on Wednesday, where it met stiff resistance and the centerline. The market was unable to break the resistance and traders quickly turned into sellers, reversing the market. The Corn ended the day as an outside day. This was a swing pattern failure. This type of pattern is typically followed by a significant price move in the opposite direction…in this case, the direction is down. It looks like the top is in, therefore, it is time to tighten stops on long positions or bank the gains.

5-MARCH COFFEE - In the last update, I said Coffee was forming a bullish reaction swing underneath the upper reaction line and appeared poised for a breakout. It didn’t take long for the market to confirm the pattern and surge 400 points before closing sharply above the long-term center line. This large separation from the center line and the close suggests the market can move toward the next reaction line. But, there should be a pullback to 145.25 before that happens. Use this correction as a buying opportunity.

6-MARCH JAPANESE YEN - This pattern is a little stretched out, but it is a bearish TR pattern and it triggered a sell signal that projects a move toward the downward sloping center line.

7-MARCH HEATING OIL - The "Reversal Tracker" identified a bullish TR pattern on Friday and triggered a buy signal in the Heating oil. The subsequent rally quickly reached the upper reaction line where it should run into some resistance. However, the next reversal date is due on Tuesday, but I see it as a continuation pattern that should only cause a short-term pause in the bullish cycle.

8-MARCH EUROCURRENCY - The EC is currently forming a bearish TC pattern. A trade below the 1.4424 pivot point would confirm the pattern and trigger a second sell signal and offer the opportunity to add to the existing short position. The next reversal date is due on February 15.

How to use the Reversal Dates

Every good trading signal needs three key elements to be considered a successful signal. Time, Price and Pattern. When these three come together, great things can happen. If you can improve your timing or price entry, it can enhance any trading method. That is what the Reversal Dates can do for you. They will identify when the market should react, and at what price level the market needs to be for this to happen. They will even tell you what the market has to do to confirm the trade. The first thing I do is, identify Time.

TIME
The Reversal Date Indicator consists of three parts. The first is Time. This is identified by the projected Reversal date and will indicate which markets are ready to react and when the reaction should occur. The most common misconception about the Reversal dates is the idea that the market must reverse on every signal date, which is not true. Instead, The Reversal Date itself helps to identify the market's reaction. A high percentage of the time, the market will reverse the current trend, but not always. A smaller percentage of the time, the market will form a "continuation pattern," indicating the market will likely continue in the same direction as the prevailing trend. Often this will occur during a consolidation or after a very small correction.

PRICE
Once the Reversal date has been identified, the next thing to do is monitor the price. If the market is making a new high/low, or if it is trading inside a buy/sell window, then the second component of a trade signal is in place. You now have Time and Price working together. For most traders, that will be enough, but the Reversal Date Indicator takes it one step further.

PATTERN
After extensive research into price patterns, I have identified specific price patterns, which occur during reversal timing. These patterns can be used to confirm the market reversals or market continuations. When, and only when, these three components are all working together, will there be a trade signal generated.

Traders Market Views is a product of Traders Network and all statements herein reflect Traders Network's market research. Traders Network and/or its principals, brokers and employees may or may not have established positions in part or all of the markets herein mentioned. It is possible that some of those positions, if any, are in direct conflict with the market commentary herewith.

THE RISK OF LOSS IN TRADING COMMODITY CONTRACTS CAN BE SUBSTANTIAL. YOU SHOULD, THEREFORE, CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER OR OVER-COMPENSATED FOR THE IMPACT IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES.

Joseph Kellogg started in the commodity business as a commercial grain merchandiser and basis trader. He was one of the architects of the Farm Marketing Program (FMP). This marketing plan was designed for agricultural businesses to use with grain options in strategies that could not only hedge their cash crops, but also aid in their marketing. He hosted "Futures Talk," a commodity talk radio program that aired bi-weekly on a Los Angeles radio station. Joseph has also developed many option writing strategies, which can be used with the reversal point method.