March corn has continued to coil inside its larger contracting triangle pattern since early fall. The consistent trend of lower highs and stable-to-higher lows would certainly appear to be setting the stage for a larger degree breakout. Foruntatley, this market has left in its wake a series of directional risk parameters from which to gauge such a breakout. From a near-term perspective, these would be the 3.84 1/2 corrective high from 1/8 and the 3.71 corrective low from 1/15. From a daily perspective, the stochastic measure of momentum certainly appears to have put in a potential bullish divergence with higher lows in momentum, while price made lower lows on 12/26 and 1/15. This would tip directional scales higher, and confirm the bullish divergence with a breakout above 3.84 1/2. With the U.S. government closed, we do not have any indication as to the leaning of the managed fund community, so indicators such as on-balance-volume (OBV) are a good tool to use instead. The 20-day OBV has a very strong reading of +779,696 contracts, the highest value since 12/24 and indicating bulls have been in control of price action over the last two to three weeks. Major moving averages are flat and representative of the rangebound trade the last three to four months, offering little to no help from a trend perspective.
March soybeans remain a case-study in classic technical formations with several long-term trend lines coming into play as of late. For this analysis, we are looking at an active-continuation chart of soybeans. Since the September lows, March soybeans have been ascending inside their rising trend channel, holding the trend line support in late November, late December and again last week. The top end of the rising trend channel has also held price action on the upside in October and December. Another interesting trend line has come into play the last few sessions, stemming from the April 30 high and the January 7 high. This trendline resistance has now blunted price action both Friday and overnight. March soybeans have regained their 200-day moving average for just the second time since June, and that indicator should continue declining moving forward. Jumping back to the straight March soybean contract, we would be looking at the 9.26 3/4 corrective high from 1/7 and the 8.91 1/2 corrective low from 1/16 as the directional risk parameters from which to base larger degree trend moves. The stochastic measure of momentum from an hourly perspective is throwing off a potential bearish divergence in momentum as prices approach the early January highs, a warning signal for bulls in our opinion.
The March Chicago wheat contract finds itself somewhere between March corn and March soybeans with both coiling and trend channel action present. March Chicago wheat has generally made a series of lower highs and lower lowers dating back to October, but has turned especially consolidative since the Christmas holiday. Fortunately, this has offered rather tight risk parameters from which to gauge the next directional move. To the upside, we would be looking at the 5.24 1/2 corrective high from 1/8 and the 5.01 1/4 corrective low from 1/2. For even shorter-term traders, a more micro-risk exists at the 5.08 corrective low from 1/15 and the 5.22 3/4 corrective high from 1/18. Short-term momentum indicators are showing declining or even diverging momentum which favor downside price action. On-Balance-Volume is in positive territory, suggesting bulls are in control of price action, although this indicator did turn lower last week. March wheat is chopping on either side of the 50-day moving average but remains firmly below the 100 and 200-day moving averages. Price action has been below both the 100 and 200-day moving averages since mid-September as the trend remains down on an intermediate to long-term scale.
Tregg Cronin can be reached at firstname.lastname@example.org
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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.