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.
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.
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.