Commodity MarketingCommodity Marketing

Chapter #3Chapter #3

Technical AnalysisTechnical Analysis

Bar ChartsBar Charts

Important market information:Important market information:

Price: high, low, close for the dayPrice: high, low, close for the day

Volume: number of contracts traded Volume: number of contracts traded

Open Interest: number of contracts that Open Interest: number of contracts that haven’t been offsethaven’t been offset

Analyst records past history, but can Analyst records past history, but can use this information to help predictuse this information to help predict

Charting PricesCharting Prices

Price

1 2 3

Day

High

Low

Close

Bar ChartsBar Charts

$/cwt

Jan Dec

Contracts

Open Interest

Bar ChartsBar Charts Volume: measure urgency behind price movesVolume: measure urgency behind price moves Open Interest: number of contracts at the end Open Interest: number of contracts at the end

of each day that are not offsetof each day that are not offset- rises: new money flowing inrises: new money flowing in- falls: money is leaving the marketfalls: money is leaving the market

Prices & Open interest rise: trend will probably Prices & Open interest rise: trend will probably continuecontinue

Prices rise & Open Int. falls, uptrend is endingPrices rise & Open Int. falls, uptrend is ending Prices, Open Int., & Volume fall, trend is about Prices, Open Int., & Volume fall, trend is about

to changeto change

Market NicknamesMarket Nicknames Bull = one who expects prices to riseBull = one who expects prices to rise

- a rising marketa rising market Bear = one who expects prices to fallBear = one who expects prices to fall

- a falling marketa falling market PricesPrices VolumeVolume Open IntOpen Int MarketMarket

RisingRising RisingRising RisingRising BullishBullish

RisingRising FallingFalling FallingFalling BearishBearish

FallingFalling RisingRising RisingRising BearishBearish

FallingFalling FallingFalling FallingFalling BullishBullish

Price TrendsPrice Trends

General direction which prices are General direction which prices are movingmoving

Prices move: up, down or sidewaysPrices move: up, down or sideways Sideways Trend: called a trading rangeSideways Trend: called a trading range

- Resistance line (upper level) prices turn Resistance line (upper level) prices turn downdown

- Support line (lower level) prices turn upSupport line (lower level) prices turn up

Sideways TrendSideways Trend

Support Line

Resistance Line

Price

TrendsTrends

Uptrend: higher highs, higher lowsUptrend: higher highs, higher lows Draw a line under rising bottomsDraw a line under rising bottoms Downtrend: lower highs, lower lowsDowntrend: lower highs, lower lows Draw a line under falling topsDraw a line under falling tops Takes two to define a trend, three to Takes two to define a trend, three to

confirm itconfirm it

UptrendUptrend

Price

Uptrend

DowntrendDowntrend

Price

Downtrend