Technically Speaking

Dec Corn's Immovable Object

Source: DTN ProphetX

It's a great question, the paradox of "What happens when an unstoppable force meets an immovable object?" I've used it in my On the Market column in the past, and was reminded of it again as I watch the December corn contract bang against its 20-day moving average again, and again, and again. The big difference is that Dec corn is not an unstoppable force, showing its fragile nature by posting a new low of $4.32 earlier this week. In reality, the corn situation is probably better described as "What happens when you throw an egg against a brick wall?"

Take a look at the daily chart for December corn. The contract has not closed above its 20-day moving average since September 3, 2013. Since then Dec corn has continued to post new lows despite daily stochastics (bottom study) showing the contract to consistently be in an oversold situation below 20%.

With little else to follow Wednesday (October 16) other than the ongoing circus otherwise known as the U.S. government, my attention was drawn to Dec corn's latest attempt to break through unyielding resistance at its 20-day moving average. At first glance, I noted that the 20-day was calculated at roughly $4.45 1/2. The overnight session through early Wednesday morning saw Dec corn posting a high of $4.46. "Maybe today is the day", I thought to myself.

However, as the morning has progressed it is becoming less and less likely that Humpty Dumpty will break through the wall. At midday the contract has moved to a new session low of $4.39, trading just above this level near $4.40. Daily trade volume remains low, amounting to roughly 57,000 contracts through 10:00, leaving the door open for a quick wave of orders to move the contract one way or the other. But a break of the 20-day moving average, a significant technical achievement, will likely have to wait for another day.

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Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.


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