Will Soybeans be the next Cocoa or Nvidia?

Will Soybeans be the next Cocoa or Nvidia?

Savvy investors/traders search out promising opportunities in markets that are large and liquid enough to consider trading. And that includes markets that rarely appear in MSM headlines. But to focus just on the hot shares/indexes alone cuts off potential large profits available in other less headline-grabbing markets. And there are fewer headline-grabbing markets for UK traders than the US grains – Wheat, Corn and Soybeans.

And that also certainly applied to the Cocoa market last year – until now.

Amateur traders/investors believe they ‘know more’ about their favourite shares/indexes than they do about the off-the-radar commodities such as those above. That is why they stick with their favourites and ignore the commodities because they ‘know nothing’ about them. That is a big mistake and I will show you why.

In fact, with a sound technical trading system, you do not really need to know much about the details of a particular market. A market is a market is a market and all price charts have the very same features with similar up and down waves. Most large to medium sized waves have just one or perhaps two main stories driving them where the fiddly details are immaterial.

Today, AI grabs most attention and while still in a strong bull market, nothing else matters except the glorious future that lies ahead for this technology (as the powerful FOMO bulls see it). Negative news is brushed aside – until it can carry on no longer when the tide turns.

It is well said that everything there is to know about a market is already in the price chart. That may be an exaggeration but to dig deeply into the fine details of a share, say, risks not seeing the wood for the trees. Less is often more. The Cocoa story is a great example.

Last year, I noted that Cocoa sported one of the most boring charts in the book. But I identified a terrific developing large wedge pattern in Cocoa (covered in my previous blogs) and with the expected El Nino weather pattern last summer, I launched my Cocoa Campaign from the long side expecting this market to waken up.

I knew that if the coming El Nino could become an extreme event, then some crops would suffer badly in parts of the world from drought, hot/cold weather and/or pests or disease.

So the El Nino story may well become the sole driving force behind my espected bull run. That was my thinking last year.

And we started getting drought reports in West Africa last year – the main Cocoa growing regions. So the El Nino was starting its work and gathering in intensity (I kept a close eye on weather reports from West Africa). The tell-tale water temperatures in the Pacific were well above average (which excited many ecowarriors, of course). I then knew prices had a greater upside potential than I first imagined. Prices had been low and range-bound for the previous five years and a bout of trade short covering should shoot the market up like a rocket..

There is a market axiom that says Never short a quiet market with prices low. It was so quiet that futures activity had dropped off a cliff and the hedge funds were staying away in droves. I am sure you had no interest in trading it last year. It was mainly traded by the commercials – and that meant it was only a matter of time before some new element forced its way into the market and shifted prices out of its five-year long trading range when the hedge funds caught on to the El Nino.

And boy, look how the El Nino filled that exciting role

I am calling this chart-for-the-ages the “Cocoa Hockey Stick” in honour of the infamous and bogus ‘climate change hockey stick’ chart that shows temperatures shooting for the moon.

Incidentally, that climate change hockey stick graph was created out of computer models that try to replicate the behaviour of the real climate. It totally failed because the earth’s climate systems are just too complex to be modelled accurately under all real life conditions. But my Cocoa Hockey Stick is drawn from actual market prices. No modelling involved. But I digress.

Cocoa has now advanced by 200% since the start of the year (thus matching Nvidia’s growth), so how do I see it panning out from here? We know that the West Africa crop projections have been cut by 50% or so and could be cut even further. Also, retail chocolate prices are starting to move up with shrinkflation showing its ugly head.

Traditionally, chocolate demand is very inelastic to price but we have never seen prices so high before. Already I am seeing headlines that Easter egg prices will be much higher this year and today’s high futures prices have not fed through yet. I imagine consumption will be curtailed through more shrinkflation and consumer self-denial.

So what to expect when the rocket starts to fall to earth? Like most explosive moves in commodities, I am looking for major spikes ahead with huge volatility. There is no price spike like those is commodities! So far, it has been a one-way street but that will end – probably in a extreme violent spike perhaps when the rain arrives..

Following on the heels of an El Nino is the La Nina weather pattern that brings colder than normal temperatures in parts of the globe. And early reports say that the La Nina is in its early stages. And those in the Cocoa business who keep a beady eye on such things will anticipate better crops next season – and help to bring the rally to a pointy end.

Of course, I have no idea when that will occur (and nobody else does either). That is why I keep a trailing stop moving up with the market and let the market decide when it wants to reverse.

But for the last nine months or so, it has been one hell of a ride and perhaps the rocket has a little more in the tank before it flares out? I note that Cocoa is getting a lot more MSM headlines and tis is often a signal to expect at least a decent pull-back.

So how about the Soybeans? Will we see a Soybean Hockey Stick this year?

The US ags/grains are huge and liquid markets and have been in bear trends for some time following their Ukraine war-inspired boosts. Corn and Soybeans have just made new lows about three weeks ago and have been gently edging up since. There were record crops last season that pressured the Soybeans to its $11.15 low which is about a Fib 62% correction off its $17.85 ATH in June 2022.

This was the chart I posted to VIP Traders Club members in early March alerting them to the huge potential for a strong bull market this season just based on the technical picture alone.

I have a clear a-b-c corrective decline to my ‘c’ wave low on a strong mom div. Regular readers will know that this is one of my favourite setups to get in early on a potentially huge wave 3 up that should exceed the wave 1 high of $17.85.

Of course with ag crops, adverse weather patterns are crucial in driving prices higher in the face of large stockpiles. And we have such a possible change in the form of the developing La Nina which should impact Northern hemisphere crops in particular as the colder and wetter-than-usual US patterns arrive this summer/autumn.

Thus, we have this year an opposite setup in the Soybeans as we did in the Cocoa last year with colder and wetter conditions expected as opposed to the drought in West Africa. But the result should be identical – severe crop damage with much reduced final harvests. And a similar strong bull market.

As for current futures positioning, hedge funds are about 3/1 short/long and are thus susceptible to short squeezes to force prices higher given some ‘surprises’.

And because the El Nino was stronger than normal, there is a distinct possibility that the coming La Nina will be just as strong in the other direction.

And in recent days China, as the world’s largest importer of Soybeans, is importing huge shipments from Brazil, the world’s largest exporter. Are they also looking at the looming La Nina and stockpiling supplies in anticipation of reduced crops up ahead – and much higher prices?

For these reasons I am starting a campaign in Soybeans. I am also looking at a campaign in the related commodity, Corn. Wheat is a very different grain and it has very different supply/demand picture.

Join me in my campaigns by taking a two week Free Trial to my VIP Traders Club.

I will have a Special Report on Wheat soon – look out for it!

Have Cannabis stocks found their bottoms?

Is it possible that the US Feds are about to re-classify cannabis from being a Class 1 drug in the same league as heroin, ecstasy and LSD? Even by the woeful standards of our governments, this is utter madness.

Amazingly, fentanyl – the hugely toxic drug that is gathering major headlines in the UK – is classified as a weaker Class 2 drug!! That is surely madness squared. The Fed’s anomaly with some of the States who have legalised the weed has been a headwind for the industry and share prices have been on the floor for many months.

But with this possible awakening of sanity by the Feds, can the cannabis industry start to get back on its feet and revive prospects for the shares that have been in the basement for many months?

Some of the major plyers such as Canopy Growth, Tilray, Cronos and Aurora Cannabis are already moving up off their basement levels as the little Fed ray of sunshine appears out of the gloom. The chart plots the sorry state of a major cannabis index.

And another tailwind for the sector is that on 1 April, Germany is set to legalise the drug. And weed investors are hoping that won’t be an April Fool joke.

But as a candidate for a Buy Low/Sell High campaign, there are few if any comparable beaten down sectors on the market today as the major indexes make new ATHs.

The Dow/S&P/Nasdaq are completing their waves 5 of 5 to their highs

The divergence between the real economy and stocks is as wide as the Grand Canyon. The EV revolution that promised so much has failed despite taxpayer billions wasted in subsidies. While the UK and the US are actively herding young males from overseas to jump across their borders in an effort to boost flagging GDP, investors in US shares are convinced the AI revolution will do just that anyway and do what the EV revolution has failed in. Where are the promised ‘green’ jobs?

And the AI siren call is luring US Mom ‘n Pop investors in record numbers to own stocks. So what possibly could go wrong? For one thing, this cohort of investors have a very poor track record with timing. Until recently, they shunned stocks preferring the safety of bonds with the new high yields. They have embraced the classic Buy High/Sell Low approach. We await their selling.

And suddenly, they have switched to shares in a flash of FOMO – but right after a stunning record-breaking advance from last October’s lows. The S&P has also met the upper tramline resistance

While I have very recently been trading the long side of the final fifth wave, I do not intend to hang around for much longer. There should be one more small pop up next week but that should be it and I will be looking to reverse positions.

Gold has been following my roadmap- but what now?

In mid November, I posted my latest video on Gold – Latest Gold update – be ready for massive surge -when the market traded around $1935. I stated it was poised to move much higher and last week it hit a $2,225 high about $200 higher in a sustained rally. So far, so good. It is pulling back now so what do I see up ahead? Has the top been reached or is there more upside to come?

I will have an update shortly so please watch out for it. My targets may surprise you!

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