Are there some opportunities in the cotton and sugar markets?

I've been revising the soft and grain commodities for a while. After that, I think a potential trade can emerge from the cotton market (CT). It has been in a descending wedge since summer 2011: from the high of September to high in January, and from the low of July to the low of December. I'll be looking for a breakup. In my opinion there is few information from the COT data. The commercials are short, but they have been since 2009 and the cotton has gone from 50 to nearly 100 that is now.

If I invest in that it'll be with the BAL. The level will be the 61-61,5. The target I can view is 74. It can be a 19% reward trade

 

In the Sugar (SB) we have more or less the same pattern. That commodity has been in a descending wedge since summer of 2011: from the lows in August-September-November to the highs in August, October and January. The COT data can be viewed as bullish. The commercials have the lowest short level since 2008.

If it breaks the wedge and go throw the January highs I'll be in with the (SGG). If it goes throw the high of January at 88, I think the target will be 104. It represents a 29% of potential reward.

 

In the two presented trades, we must consider several things:

-         The descending wedges can be tricky. Usually it isn't a very hard break.

-         The level of the stop will be fixed the day of the operation (usually the low of that day) so the risk-reward will be determined then.

-         A weak dollar can help a lot with that trades because that usually encourage the risk assets and the commodities are looked as that.