Do You Need To Go on a Low Carb Diet?
- Posted by TheArmoTrader
- on March 30th, 2011
With rising commodity prices, none other is more important than those classified as Carbohydrates (or ‘Carbs’ for short). Grains, as classified on futures exchanges, are made up of Wheat,Corn, Rice, Soybeans (and it derivatives), and Oats. One Carbohydrate not classified as a grain is Sugar (instead it is listed as a soft). Why are carbohydrates SO important? Its because out of the 3 macro-nutrients (carbs, protein and fat), carbohydrates are the highest intake (by percentage) for people around the world. The average American’s diet is nearly 50% carbohydrates. In other places around the world, it is even higher.
Despite all these cries that inflation is running rampant, all of the aforementioned carbs besides corn are DOWN year-to-date (YTD). Yes, I know, I know—for the period of 1 year, they are all up and up big. However I am concerned about the NOW and future. Will these prices stay up or will they go down from here?
So to answer the question, lets take a look at the charts. (Caveat: I am not a fundamentalist, I base my work off charts,technicals and what I know)
1) $ZW_F – Wheat has to be the most important carbohydrate on this list. It is the essential ingredient used in many ‘cereals’ like bread, pasta, breakfast cereals and even some pastries & pastry-like foods. A lot of diets around the world are based on these foods. So the price of wheat is the MOST important in my opinion.
Technically it is below a very important pivot price of $750. As you can see in the chart, even since last August, this level has been really important as it is failed and/or held it many times. As long as it holds below, the price of wheat should fall. It is also putting in lower highs and lower lows.
2) $ZR_F – Rice has to be the #1 or #2 most eaten food around the world. In fact, Rice ‘provides more than a fifth of calories consumed worldwide by humans’. Along with bread, it is probably the most crucial food in diets worldwide seeing how its so (relatively) cheap.
Right now it is in a slanted Head and Shoulders pattern. As long as it stays below ~$1440, this could go and test the most recent lows near $1250. Below that it would be in a vacuum down.
3) $ZO_F – Oats are probably the least versatile carbohydrate on the list. The three main uses for oats are in cereals, for flour, and for livestock feed. I eat oatmeal everyday, so personally I would love to see the price of oats coming down.
Technically, it is testing its descending trendline right now. A break above this ~$355 level would be bullish. However, a failure here would send it down to ~$320. A break below that most recent lower low would make this an official downtrend.
4) $SB_F – Sugar is mainly used to make sweets,pastries, but also can be used in the process of making bread as well. Even though it is not a vital product for people to survive, it still is used in many cultures in daily life.
Right now, sugar is testing the descending trendline. It is making lower highs and lower lows. A failure here and break below ~$25.10 would make this an official and valid downtrend.
5) $ZC_F – Corn is a tricky grain to analyze. It is not only used for consumption by humans, but also for consumption by machines. Ethanol, which can be derived from Corn also plays a role to the price of it. So corn being up for the year is not a huge worry of mine. Despite that, it has put in a Head and Shoulders pattern. As long as it stays below $700, it does not look bullish because it is making lower highs and (looks like so far) lower lows.
6) $ZS_F – While soybeans are split equally of carb and protein, they still play a crucial role in food inflation. Besides the fact that soybeans are used in many foods and even eaten raw as vegtables, there are two products that are derived from soybeans— Soybean Meal and Soybean Oil. Those 2 ‘grains’ are vital ingredients to many products used around the world.
Right now, soybeans are testing the descending channel trendline. It is making lower highs and lower lows. A failure here should send it below 1275 towards the bottom of the channel range.
While these are not the most bearish trends, it looks like these carbohydrates are making a turn for the worst. I would watch the levels noted above to see if these prices are going to go up or down. So to answer the million dollar question- Should you go on a low carb diet? No. As long as these grains (and sugar) stay in bearish patterns, I see no reason to cut back on your carbs. Now go ahead, eat that cookie.
One guy to follow who is constantly on these chart patterns is @PeterLBrandt. His Stocktwits blog is located at: http://peterlbrandt.com/
The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Jerry Khachoyan is currently an undergraduate student at UCLA pursuing a degree in Political Science. He started trading in September of 2008. He concentrates on using technical analysis and reading the tape to enter the best risk/reward trades. The stock market to him is one of the greatest inventions by man.
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