Futures Outlook: Is It Time for Corn to Pick Up the Slack?

Lindsay Hall  |

Futures Outlook for the Week of 05/6/13

Corn has been in failure mode for a while now, but looking forward over the next number of months, you might see that shift.  The longer term charts are a bit overextended and as we run into support territories, we’ll have to watch closely to see if they hold and begin to push us higher.  In addition, we’ve seen some bullish activity that could give us a secondary cycle that could spell out opportunity coming into the summer.


Let’s look at the Daily chart first for some near term perspective.

This chart shows Corn’s dramatic failure between the end of March and the beginning of April.  This occurred based on the release of supply data.  After the dramatic Daily failure, we saw it settle out a bit and move sideways for a month or so.  Now, we have seen a little bit of an upward push in the last couple of weeks that could be our first step forward in an upward swing that might end up challenging the larger overall trend which has been negative for a while.  While one should always keep an eye on the Daily chart, as it is what builds the larger picture, in this case this chart is not our main concern.  Let’s move over to a Weekly chart to step into a slightly broader viewpoint.

On our Weekly chart for Corn, I have highlighted a few things that I think might enable us to find and potentially sustain a longer term upward shift.  First, I want you to look at and notice the descending channel that started out pretty clean running nicely lower from September of last year into January of this year.

Once January came around, we started to see a bit of consolidation forming which allowed Corn to regain some energy and test outside of the descending channel.  I have highlighted the upward barrier with a dotted red line where we started to see the collapse of these high side boundaries on our channel.  We still see a clean scenario for the lower level boundaries in this channel as highlighted with the continuous blue line.  Notice though, that while we have recently respected the lower levels on this channel, we are pushing once again through what should have been the upward barriers.

At this point, let’s shift focus to our areas of support and resistance across the chart over time.  I have highlighted a territory that seems to get quite congested with black horizontal lines.  This territory on the Weekly chart is where we want to pay attention.  If we are able to utilize this territory as a true support buffer, then we might very well see buying pressure allowed to develop.

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Look now to the far right of the chart and where we sit currently.  Our current pricing shows us having broken through what should have been an upward barrier for the descending channel and in addition, sitting almost on top of this potential support range.

If we can use this as a new foundation, then our push upwards may end up with legs.

Moving over now to the bigger picture perspective on the Monthly chart, there are only a couple of things that I have highlighted here.  First, at the left hand side of the chart, notice that there was historically a failed Head and Shoulders pattern.  The pattern encompassed a ballpark 4 years in this market.  When that pattern failed, we saw Corn settle momentarily and then ascend in great fashion.

At this point, we are creating a bit of an upward trendline that is being respected.  Even with the multi-month failure that we’ve seen, we still hold this trendline so far.  In addition, the decline that we’ve seen over the last number of months, as previously mentioned, created a descending channel.  This descending channel at this point seems a bit overextended to me.  If we can remain at and above the psychological and prior resistance level of 675, utilizing it as support, then we may have a chance at breaking 700 and potentially even challenging 800 over the next number of months.

The one caution flag here is that if we cannot use the range mentioned before as support, then we could see the overall longer term trend line challenged on a failure.

In evaluating Corn and its potential, I believe that the Weekly chart will be your most important guide.  If we can use 675 as support and if supply doesn’t shift dramatically to a superfluous level, Corn may just have a shot at picking up the slack and marching onward.

For those of you, who may want to explore the Corn market without “going all in” so to speak, consider utilizing Options to dip a toe in this market.  We focus on utilizing Options on these Commodities in order to lessen capital outlay and we use fixed risk strategies that allow you to rest at night knowing exactly where you stand.  You should be prepared for the appropriate actions should these markets start to shift.  We are here to make your options clear!

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