Here we are, looks like we're at long term resistance level going back to the 90's. Too scared to short it though, have a bad feeling. Also would have to put a stop loss on it which I don't like to do. Contract size for lumber is heavy as well.
Here's an interesting video about lumber that came out recently from the Uneducated Economist. Still sounds bullish according to his estimate if I understand correctly:
No. We are totally not interested to trade Lumber Futures no matter how bullish people says and no matter how bullish the chart says. we are not easily fooled to buy lumber. we will not trade lumber now and forever, till end of time. Lumber is totally un interesting.
I would never advise any of my clients to trade a market that thin. I’ve met a few lumber traders in the past and they were strictly OTC on the commercial side - the futures contracts were not liquid enough for them.
Lumber had an extremely bullish day Friday. Didn't even flinch at the resistance area and went up maybe 14% at one point. I think maybe some shorts got squeezed. Then Saturday morning when Google was playing news stories for me I was surprised one of them was about lumber, an interview with a lumber futures person who said there's been lot's of demand for lumber, and on top of that the mils had shut down due to the virus and when you shut down a lumber mil it's not as easy to turn it back on. But at these extreme prices I imagine there's going to be lots of mils starting back up. Looking at the lumber monthly chart it seems generally very much ranging and making quick moves up or down, so when it comes back down I imagine it'll come down fast. Not into trading it personally given all the challenges with it.
The Sept contract - the most “liquid”; traded 575 contracts on Friday. There is no meaningful “support” and “resistance”. None. All of the legit commercial volume is done OTC.
What do you mean there's no meaning support and resistance? Because of the low liquidity, or the chart? What could go wrong if someone buys or sells one of those futures contracts?
No meaningful volume at price. Legitimate Support and Resistance requires significant volume to be exchanged at those price levels. The risks are extraordinary with a futures contract that thin. The execution slippage and the complete lack of liquidity when you need it is a disaster. Markets this thin are also easily manipulated and gamed. If you want to lose $50K on a one lot - this is your market.
So is there no point in discussing lumber as a retail trader, since from what you say it sounds like you should not trade it at all.
Yes, that is the point I have been trying to make throughout this thread from day one. If you are a Commercial with inventory who can make or take delivery - then ridiculously thin gappy illiquid markets can be somewhat manageable. But alas you are not.