Technically Speaking

Corn, Fuel in Focus

June ethanol futures remain in a solid uptrend but have the 50% retracement of the preceding sell-off just overhead at $1.107. (DTN ProphetX chart)

July Corn:

The incredible downtrend in the corn market present since the beginning of 2020 has been the dominant technical factor and remains so to the present day. However, the smallest slivers of bullishness are beginning to surface, something bears will need to monitor closely in coming sessions. First, Friday and overnight trade has managed to just push above the April 30 corrective high at $3.22 1/4, although we have yet to see a close above that level, which would be required to confirm the short-term trend as up. The stochastic measure of momentum is sharply higher, and with trade above the April 23 corrective high at $3.31, it would confirm a bullish divergence in momentum. Admittedly, July corn still has a mountain of resistance to overcome to flip longer-term trends higher with the 50-day moving average up at $3.41 3/4. Still, with large spec traders net-short over 246,000 contracts, plenty of upside momentum exists if just a small spark can get this market moving.

June Ethanol:

While much of the focus has been on corn, the technical action in ethanol futures has been fairly solid of late. On Friday, ethanol futures traded up to $1.104 before settling at $1.09, which was the highest trade since March 17. A series of higher-highs and higher-lows have been made since setting record lows on April 1, a requirement of healthy uptrends. At the highs Friday, ethanol futures hit the 50% retracement of the $1.386 to $0.828 sell-off at $1.107. Unlike corn, ethanol futures have already traded through the 50-day moving average while the 100-day moving average sits at $1.193. It is encouraging to see one of corn's byproducts with such solid price action and could be a foreshadowing of things to come in the corn market. At the very least, improved ethanol prices should lend themselves to improved ethanol profitability and the ability to bid for corn.

June RBOB Gasoline:

A solid short-term uptrend is present in RBOB futures, which has spot prices trading at the highest levels since March 13. Like ethanol futures, RBOB has traded through its 50-day moving average although the 100-day sits up at $1.2256 versus spot prices of $0.9470. June RBOB futures are closing in on the 50% retracement of the $1.8033 to $0.4605 sell-off at $0.9734. Another huge target the RBOB market has above is the gap left on the daily continuous chart from $1.3840 to $1.2348. This gap should act as a magnet for price action until closed, although the fact it is still more than 30% away from spot prices should ensure it isn't anything the June contract will have to deal with. RBOB continues to trade at a discount to ethanol futures, which is problematic for the ethanol industry. As long as ethanol trades at a premium to RBOB, there is no incentive to blend more than the mandated 10% level. Regardless, a strong and up trending RBOB market should provide support to both ethanol and corn futures in the near-term.

Tregg Cronin can be reached at tmcronin31@gmail.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.

Comments

To comment, please Log In or Join our Community .