March corn finally closed the daily gap which had been open since its formation on Nov. 30. The gap did not lead to an "island top" formation, which would have been a bearish pattern, resulting in further losses straightaway. Since filling the gap, March corn has found support at the 61.8% retracement of the $3.67 to $3.87 sell-off near $3.75. A bullish divergence in momentum has not been seen in daily momentum, but momentum on hourly charts is showing a divergence with price. This would suggest additional consolidation at this level of support at the very least. March corn has traded below both its 50- and 100-day moving averages at $3.79 to $3.80 for the first time since Nov. 30. The 20-day on-balance-volume (OBV) remains in positive territory at 949,989 contracts, the highest level since mid-October. Taking a bit longer view, March corn on a continuous basis rejected the upper-range cap at the August highs around $3.85 to $3.90. There are two ranges present from the last five to six months: $3.55 to $3.75 and $3.45 to $3.85. Current price action is at risk of sinking back inside the midpoint of those ranges, which would promote additional, aimless trade until one end of the range cap can be broken again.
January soybeans have flipped short-term trends down but remain inside the larger rising trend channel dating back to the September lows. Soybeans on a continuation basis traded through the July 31 highs at $9.22 before reversing, which in our mind is the same as a rejection of the upper range cap. That price action will solidify the $9.20 to $9.30 area as long-term resistance on any subsequent rally attempts. Similar to corn, soybean prices are sinking back inside the range, which contained this market for much of the fall period. Momentum indicators are still very weak and not at all suggestive of a potential bullish divergence in momentum. Current momentum readings like those on the stochastic measure of momentum illustrate rather clearly why the terms "overbought" and "oversold" have absolutely no place in technical trading whatsoever. A market can remain in "overbought" or "oversold" territory for days, weeks and even months as we've seen many times throughout history. The low readings on momentum indicators such as the Relative Strength Index and Stochastics show how strong or weak a market truly is as opposed to when to buy or sell a trending market. Bulls remain in control of daily participation according to the 20-day OBV, although this number should start to trend lower soon. Soybeans have just traded under their 50-day moving average on an active-continuation basis with the 100-day just below at $8.71. If prices manage to trade through the bottom end of the rising trend channel, it should promote additional losses to the $8.57 area with further support around $8.41. January soybeans are challenging the bottom end of their rising trend-channel near $8.80. Momentum indicators are still headed lower, highlighting just how weak the price action in this market is, and in no way suggesting this contract is "overbought." Prices have just slipped below the 50-day moving average (white) and are just above the 100-day (pink).
After an impressive 40-cent rally from the November lows, March Chicago wheat has rejected the $5.40 area and subsequently traded back through the 50-day moving average at $5.21. Like corn and soybeans, Chicago wheat is showing no signs of divergening momentum, likely indicating a move back toward the November lows near $5.03 to $5.05 is necessary for base building. Bears have taken over control of daily price action with OBV trending lower and likely turning bearish this week. Further arguing for a retest of the November lows is the fact price has already traded through the 61.8% retracement of the entire $5.03 to $5.38 rally. Looking at an active-continuation chart, Chicago wheat is re-entering the rangebound trade, which capped this market going back to mid-September. That range would be $4.85 to $5.31, and it looks as though both bulls and bears can look forward to additional whipsaw trade until another offensive can be mounted at one end of the aforementioned cap.
Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.
Tregg Cronin can be reached at email@example.com
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