Technically Speaking
Darin Newsom DTN Senior Analyst

Sunday 04/27/14

Ag Markets: Weekly Analysis

Corn: The July contract closed 12.25cts lower. The contract posted a solid rally off its test of initial support near $4.90, a price that marks the 33% retracement level of the previous uptrend from $4.21 3/4 through the high of $5.24 1/4 (week of April 7). Last week's rally established a bullish outside pattern on the contract's weekly chart, while stochastics continue to show an overbought situation. Follow-through buying could lead to a test of resistance near $5.18 3/4, a price that marks the 38.2% retracement level of the previous downtrend from $6.76 through the low of $4.21 3/4.

New-crop Corn: The December contract closed 9.50cts higher. The secondary (intermediate-term) trend has turned sideways on the weekly chart. Similar to the July contract, new-crop December posted a bullish outside pattern on its price chart last week, indicating a possible continued rally this week. The next target is $5.24 1/2, a price that marks the 50% retracement level of the previous downtrend from $6.14 through the low of $4.35. Weekly stochastics remain above the overbought level of 80% and bearish.

Soybeans: The July contract closed 8.00cts lower. Despite the lower weekly close, the secondary (intermediate-term) trend remains up. However, weekly stochastics are near 90% showing a sharply overbought situation. With the inverse in futures spreads weakening, reflecting a less bullish commercial outlook, the market could start to come under pressure as it tests resistance at its recent high of $15.21. Major (long-term) resistance on the monthly chart is near $15.49 3/4, a price that marks the 61.8% retracement level of the previous major downtrend from $17.89 (September 2012) through the low of $11.62 1/2 (August 2013).

New-crop Soybeans: The November contract closed 0.50ct higher. The secondary (intermediate-term) trend remains up. However, weekly stochastics are above the 90% indicating a sharply overbought situation. The spot-month contract is testing price resistance between $12.39 1/2 and $12.51 1/2, prices that mark the 61.8% and 67% retracement levels of the previous downtrend from the high of $13.33 through the low of $10.88 1/2. The November to January futures spread continues to trend sideways, its small carry still reflecting a bullish market view of supply and demand.

Wheat: The new-crop July Kansas City contract closed 14.50cts higher. Weekly stochastics show the secondary (intermediate-term) trend remains sideways to up. The July KC wheat contract is testing resistance between $7.77 3/4, a price that marks the 67% retracement level of its previous downtrend from $8.67 through the low of $5.99, and its recent high of $7.94 1/2. Given weekly stochastics above the overbought level of 80%, the contract could soon establish a double-top formation. However, if July KC wheat is able to make a substantive move above its previous high it would imply a possible test of the contract high of $8.67 (November 5, 2012).

Cotton: The July contract closed 0.91ct higher. Despite the higher weekly close the secondary (intermediate-term) trend remains down. Initial support is between 90.43 and 89.49, prices that mark the 33% and 38.2% retracement levels of the previous uptrend from 77.74 through the recent high of 96.76. The contract continues to consolidate, testing resistance between 92.40 and 94.07. Weekly stochastics remain bearish.

New-crop Cotton: The December contract closed 0.77ct higher. The secondary (intermediate-term) trend remains up. However, weekly stochastics are well above 90% indicating a sharply overbought situation. The strengthening inverse in the new-crop December to March futures spread indicates continued support from commercial traders. Despite being overbought, the market structure of the contract could result in a test of its high of 86.00.

Live Cattle: The June contract closed 2.400 higher. Despite weekly stochastics suggesting the secondary (intermediate-term) trend remains down, the contract seems on a path to test its high of $139.00. Given the recent weakening of the June to August futures spread (less bullish commercial outlook), a double-top formation would seem in order. The most recent CFTC report showed noncommercial traders liquidating a portion of their net-long futures position. Eventually this combination of factors could lead to a test of initial support near $133.20, a price that marks the 33% retracement level of the uptrend from $121.575 through the contract high of $139.00.

The most recent CFTC Commitments of Traders report was for positions held as of Tuesday, April 22.

To track my thoughts on the markets throughout the day, follow me on Twitter: www.twitter.com\DarinNewsom

Posted at 6:45AM CDT 04/27/14 by Darin Newsom
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