After a bearish start to grains this past Monday, most contracts have slowly erased much of the loss seen after traders came out of the weekend in a bearish mood. One of these contracts, December corn, has quietly moved back to the plus-side for the week, priced 2 cents above last Friday's settlement waiting for Thursday's reopen.
As its weekly chart shows, December corn has moved above minor resistance near $4.83 1/4 and seems to have its sights set on the next target near $5.03 1/2. This price marks the 38.2% retracement level of the previous downtrend from $6.14 (week of September 17, 2012) through the low of $4.35 (week of January 6, 2014).
The contract has built a solid, if unspectacular, uptrend since establishing a rounded bottom (isn't that a great technical term?) over the winter. A return to classic behavior and patterns in corn (e.g. a penchant for long sideways trading ranges, rounded tops and bottoms rather than price spikes) is an indication that the market appears to have calmed after the initial stages of its long-term demand market from 2006 through 2012. But this is a much bigger topic, and will be covered in an upcoming On the Market column.
As for the December corn contract, the tortoise-like rally has pulled it into an overbought situation, with weekly stochastics (bottom study) above the 80% level and hinting at a bearish crossover in the near future. If pressure from noncommercial selling does begin to build, support from the commercial side of the market could limit a short-term sell-off. Note that while the December to March futures spread (second study, green line) has seen a bit of a downturn this week, the 7 cent carry remains at a neutral to bullish level of total cost of carry (total cost of holding grain in commercial storage).
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