Today I put on my first trade of the year in my paper trading account.
I like what I see in sugar futures so I used the ETF SGG to get long exposure in that market.
Trade details below:
|Entry (105 shares)||$38.04|
|Stop (close at or below)||$37.20|
|Risk Per Share||$0.84|
|Reward Per Share||$5.96|
|Risk / Reward||$7.10|
|Total $ Risk||$88.20|
|Total $ Reward||$625.80|
|Potential Return on Invested Capital||15.67%|
I like this trade for a few reasons:
1. Pessimism is reaching multi-year extremes again while commercial hedgers are increasing their long positions, meaning that the smart money thinks prices are going higher.
2. Momentum is positively diverging on both the weekly and daily timeframes.
3. A false breakdown in price below the September ’14 lows of 14.51 allows us to define risk at that level. Below that, we are wrong.
4. Prices are flagging above that level and trying to breakout above a key downtrend line.
5. Prices are extended from their weekly and daily 200 period moving averages.
I will be adding the second half of the position, another $4k worth of shares, on a break and close above this downtrend line. My target is up near 44, a prior resistance area and the 200 day SMA. I expect this trade trade to play out over the next few months. I will be wrong with a close at or below $37.20.