For all my readers I would like to send a good morning all the way from Brazil in South America, as I am here to attend some work. I am sorry I won’t be able to attend the calls of my readers as I won’t be back before 15th June because after Brazil I will be off to America for some other work. The weather out here is cloudy and it does rain heavily which I suppose is still not the case in India till now. After the cyclone hit Calcutta the clouds have dried out a bit as the satellite images show. But that does not seem to be the case to worry as of now. Rains have already hit south of India as Karnataka has been experiencing some showers everyday. The initial rains that had hit India all over were because of the heat wave and they were not the actual rains that mark the beginning of the monsoon.
Now as far as the world situation goes, North Korea has again started testing their nuclear weapons, which does scare America the most. Even tough America will deny the fact that they are scared they will always try to put it very diplomatically that it is dangerous for the world, that if North Korea or Iran have nuclear weapons. North Korea is supposed to be the most secretive country in the world. It is ruled by a dictator and such a situation is dangerous for any country in the world. Many journalists have secretly shot videos of the situation of the people staying in North Korea and how they suffer the miseries as the country is completely cut off from the whole world.
This news has no doubt given crude the well needed vitamin shot in the arm and after that the prices have been shooting up like a missile. In the beginning of this month crude prices were at the low of $51.55 and after that it has made a high of $65.25. The charts have shown a breakout in the prices which were at the price of $62.65. now when you will be reading this article it will the beginning of the new month of June which means if the crude prices have managed to close above $62.65 in the month of May then this marks the beginning of a new rally in the prices of crude. This rally will continue to the prices of $70.65 which may be a point where crude prices will take a break and show a slight reversal of prices for profit booking. But this can also be a trap rally as I call it because the prices are rallying because of the current geo-political scenario and not because of the fundamentals that are supposed to be the right factor to look into. Historically crude prices have made huge rises when wars have broken out in any part of the world. If there is any geo-political disturbance in any part of the world, crude prices will always run at a premium of $15 to whatever were the prices of crude in normal situation. This means that crude right now is at $65 and is $15 higher than its nominal prices. And when such a situation is settled down the prices gradually retrace back to their nominal prices. There is a possibility that the prices may come back to around $55. This situation is quite unlikely till the prices touch $70.65. To trade in this wave of higher prices is a risky game but some good money can be made out of it. Now if you wish to trade in crude then your stop loss will be a close below $62.25 for two continuous days. If the prices manage to close below $62.25 for two consecutive days then exit your positions but do not make the mistake to selling then. Then it will be better to stay away form it. In this rally the weakening rupee will also act in you favor as when it starts getting weaker and the crude prices rise it automatically gives more return in Indian crude prices due to the price valuation of the rupee.
Now as I am in Brazil the other commodity that comes to my notice is soybeans and sugar. Both the crops are huge in Brazil as far as the figures go. Remember when America had declared that this year they will encounter fewer crops of soybeans. But what I want you to know is that the figure that America declared were only the projections that they may sow less crop of soybeans, which does not mean that the actual sowing will be less. Logically at such prices that have been running in the markets which farmer will decide to sow fewer soybeans? The actual sowing figures will only be in after the month of June. That will be the deciding factor for the prices of soybeans. There is a huge crop of soybean hitting the international markets as far as Brazil and America is concerned and the demand is more or less the same as last year. So do not expect the prices of soybeans hitting sky high but expect them to be on the down run in the coming future. The prices are overvalued so having a long position will not give you any decent returns.
The same is the situation in sugar as in soybeans. So if investors are in any way deciding on taking long positions in sugar and soybeans you need to review you decision.
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