Technically Speaking

Let me begin by offering my apologies for not having a chart attached to this blog. I am using an updated computer program, and so far have been unable to figure out how to transfer a chart from my ProphetX system to the blog site. So, I will do my best to recreate what I see on the December corn daily chart in words.

It all starts with the previous downtrend that was established after the contract posted its high of $8.49 on August 10. December corn steadily worked lower through its low of $7.11 3/4 posted on September 27, a test of technical price support at $7.15 1/4, the 38.2% (Fibonacci) retracement level of the previous uptrend from $4.99. Along the way, September 11 to be exact, the contract moved below its 50-day moving average. This tends to be a key moving average in corn, as the chart continues to show.

Then came the minor (short-term) key bullish reversal on September 28, quarterly stocks report day. That session saw December corn post a low of $7.05 before rallying to a high and close of $7.56 1/4, up the 40-cent daily limit. The thought at the time was that corn had turned the bullish corner and was set to reestablish a secondary (intermediate-term) and major (long-term) uptrend. But, as is sometimes the case, it didn’t prove to be.

December corn ran into solid resistance between $7.52 and $7.77, the 33% (Dow Theory) and 50% retracement levels of the initial selloff from $8.49 through the September 28 low. On October 11 the contract had rallied off its previous day’s low of $7.32 1/4 (another number that becomes more important going forward) to post a high of $7.76, just short of the 50% retracement level and within striking distance of the 50-day moving average calculated that day near $7.81 1/2.

Since then December corn has been in a tightening range between the 50-day moving average, the latest test occurring Friday, November 9 as it posted a high of $7.55, and the previously mentioned low of $7.32 1/4. Given that the 50-day moving average is approaching the above mentioned technical resistance at $7.52 (the 33% retracement level), it would appear that a break out is imminent, possibly as soon as this week.

The million dollar question is which way, and at this time, technical signals are less than clear. Short-term market bulls could point to daily stochastics holding in the low 20% range. The last crossover was bullish (both lines below 20%) occurring on September 13. A secondary crossover occurred in conjunction with the bullish reversal on September 28. Also, daily market volatility has fallen to 18.5%, a possible buy signal for investment traders. However, some of the recent decrease in volatility could be due to the previous roll by fund traders from the December contract to the March, with the latter now showing a larger opening interest number.

Short-term market bears will point to the resiliency of resistance at both the 50-day moving averages and retracement levels. Add in the frequency of tests of the $7.32 1/4 support line (at least five so far) and a downside breakout seems more logical. If so the contract could move below support near $7.15 and possibly test longer-term technical price support at $6.74, a price that marks the 50% retracement level of the previous uptrend from $4.99 through $8.49.

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Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.