Grain Rallies in Focus
While corn, soybeans and Kansas City wheat were covered in last week's Technically Speaking blog, few markets offer a more relevant technical environment than those markets this week. In looking at December corn, we can see a continuation of the rally that began Sept. 9, which has indeed confirmed the head-and-shoulders' reversal pattern with trade up to the $3.95 to $4.00 area. The trick with this specific market is identifying the proper wave count to ascertain where in the rally current prices lie. On a daily chart, it could be argued December corn is in the midst of the fifth wave of a simple five-wave bull count. If we measure the wave one move from $3.52 1/4 to $3.77 1/2, and attach it to the end of wave four at $3.78 1/4/, the move suggest a fifth wave target of $4.03 1/2. Looking at a full volume profile dating back to the highs at $4.73, there was not a lot of activity at the $4.03 level, but instead a much larger amount of trade took place at the $4.11 1/2 mark. Coincidentally, the 138.2% progression of the wave one move from the wave four corrective low sits at $4.13, creating an area of increasing interest between $4.11 and $4.13. From a weekly perspective, December corn would still be considered in wave one of either a three-wave corrective sequence or a larger five-wave bull sequence. Regardless, additional strength can be easily argued from spot prices.
Even more impressive than the move in December corn has been the move in November soybeans, which dates back to Sept. 9 at $8.57 3/4. November soybeans have now reclaimed the entire June 18 to Sept. 9 sell-off, no small feat considering the move spanned 97 cents. From a continuous perspective, spot prices are now at their highest level since June 13 and offer a better view on a roadmap moving forward. From that spot view, the $9.15 to $9.30 level has offered a fair amount of resistance on three separate occasions, which should in-turn act as support on corrective setbacks. From a weekly perspective, a quasi head-and-shoulders pattern can be seen here too with the shoulders at $8.11 in September 2018 and $8.40 in August 2019, while the head sits down at $7.80 from May 2019. Measuring the head to neckline yields a price projection near the 2018 highs around $10.70. A projection of that magnitude is difficult to put much stock in at the moment, although it should be noted there is little prior price resistance in the way from spot levels to those $10.70 corrective highs. The full profile from $10.71 down to $7.80 shows a great deal of volume occurring between $9.80 to $9.90, which should be an area of intense focus if the current rally progresses higher.
December Minneapolis wheat remains a market of interest as well with a noteworthy technical setup. The rally from early September lows up to the late September highs spanned 73 cents, and when snapped upon the $5.21 corrective low on Oct. 2, point toward a price projection of $5.94. This would take out the corrective highs from June 12 by a penny and mark one of the more impressive recoveries in recent memory. Before any pie-in-the-sky price projections can even be entertained, Minneapolis wheat needs to recover above the $5.59 corrective highs. In doing so, momentum will be a key indicator to watch to see if new highs can be made in price and momentum or whether new highs in price are met with lower highs in momentum. Should the latter be the case, we would be wary of a bearish divergence in momentum, signaling the move has run out of steam. Since those June 12 highs, the volume point of control, or VPOC, is $5.45. December prices have recovered above that level, highlighting the fact the area of most activity is now below the market. We look for a retest of those $5.59 highs in the days and weeks ahead with momentum being our indicator of choice for navigating either a continuation of the rally or a reversal count lower.
Tregg Cronin can be reached at email@example.com
Follow Tregg Cronin on Twitter @5thWave_tcronin
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.
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