Analytical Tools/ Technical Analysis

A Guide to Timing of Pricing Decisions Answer the question of when to price, NOT what price Answer the question of when to price, NOT what price What price is determined by your marketing plan What price is determined by your marketing plan Based on history and certain tendencies Based on history and certain tendencies Works because of the “Herd Mentality” of traders Works because of the “Herd Mentality” of traders

Bar Graphs CME Group Commodity Marketing Manual, Chapter 5

CME Group Commodity Marketing Manual, Chapter 5, Page 51

Point and Figure Chart The analyst uses an X to indicate the day's price when prices are rising. When the prices reverse and fall, the analyst goes to the next column and records O's. Helps to smooth out the daily changes in the chart CME Group Commodity Marketing Manual, Chapter 5, Page 52

Sell Buy Sell Trend Lines CME Group Commodity Marketing Manual, Chapter 5, Page 51

Trend Lines Upward Trend Line Downward Trend Line

Triangles Triangles generally interrupt a trend, and occur when supply and demand are temporarily balanced. Upward price movement is balanced by selling. Downward price movement is countered by buying. After this pause prices tend to break out, generally continuing in the direction of the original trend. The breakout can indicate a buy or sell signal CME Group Commodity Marketing Manual, Chapter 5, Page 55

CME Group Commodity Marketing Manual, Chapter 5, Page 51 Triangle

Resistance and Support Planes CME Group Commodity Marketing Manual, Chapter 5, Page 56

Support and Resistance Support Resistance

Double Bottom

Trading Volume

Open Interest

CME Group Commodity Marketing Manual, Chapter 5, Page 53

Key Reversal CME Group Commodity Marketing Manual, Chapter 5, Page 57

Key Reversal

Island Reversal

These two will be close to equal CME Group Commodity Marketing Manual, Chapter 5, Page 58 Chart Gaps

Head and Shoulders Projected Move Distance between Head and Neckline CME Group Commodity Marketing Manual, Chapter 5, Page 54

Relative Strength Index

Moving Averages Averages the price for several days Averages the price for several days Smoothes out the short term peaks and valleys Smoothes out the short term peaks and valleys When lines are crossed indicates a buy or sell When lines are crossed indicates a buy or sell CME Group Commodity Marketing Manual, Chapter 5, Page 60

Moving Averages Sell Buy

Practice (Dec Milk)

Practice (Mar Corn)

Much of this information came from a video “Hedging and Options Workshop” Vol 4: ABC’s of Technical Analysis Much of this information came from a video “Hedging and Options Workshop” Vol 4: ABC’s of Technical Analysis It is available from the NICC Library (332.6 Hed) It is available from the NICC Library (332.6 Hed)

Summary Charts are an “indicator” of movement Charts are an “indicator” of movement Powerful tool for Selective Hedgers Powerful tool for Selective Hedgers “Discipline” is the Key “Discipline” is the Key Don’t try too many approaches Don’t try too many approaches Pay attention to volume, open interest, and RSI Pay attention to volume, open interest, and RSI

Homework Chapter 5 Exercise (Page 61) Chapter 5 Exercise (Page 61) Chart two different contract months of Lean Hogs for five days Chart two different contract months of Lean Hogs for five days