May Soybean/Wheat spread: Jump Right Back In

Not the Most Auspicious Start…

On November 5th the blog bought the May 2016 soybean/wheat spread at $3.56. The spread was exited on November 6th at $3.45 1/2. Taking this loss of $525 (not including commissions) per spread just the day after entry is certainly not a good way to start a new trade!

But we soldier on…

The premise of the May 2016 soybean/wheat spread is based on a seasonal pattern that shows that a two-month hold period has been profitable for the last decade and a half. The two-day close below the prior contract low, however, prompted us to get out.

May 2016 Soybean Wheat spread daily

May 2016 Soybean Wheat spread daily

If the spread were to make an immediate turnaround, it would trigger a Wash &Rinse buy signal. This would give us reason to get right back on the horse, so that’s exactly what we’re going to do.

Trade Strategy:

For tracking purposes, the blog will make a hypothetical trade by buying one 5,000 bushel May soybean contract and simultaneously selling one 5,000 bushel May wheat contract if the spread closes at $3.56 or higher. If filled, risk a two-day close of two cents or more below the contract low that precedes the entry.

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