Technically Speaking

Corn, Soybeans Challenging Higher Prices

December corn has pushed through the 61.8% and 76.4% retracement levels of the 3.88-3.42 sell-off, arguing for a retest of the August highs. (DTN ProphetX chart)

The two-day rally in December corn to close last week was impressive but it also may carry longer-term technical implications. For starters, the rally pushed price above the $3.70 range cap, which has held the price in check since mid-August. Further, the rally has passed the 50-day moving average. Friday's close was held in check by the 100-day moving average at $3.73, but Monday's continuation pushed past that hurdle as well. The move is keeping alive the inverted head-and-shoulders pattern that we first noted in late September. If the pattern remains intact, it projects strength around $3.95. Momentum indicators such as stochastics are warning of a potential bearish divergence, which will need to be monitored in the coming week's trade. Price is through the 61.8% retracement of the $3.88 to $3.42 sell-off, arguing for a retest of those July highs. We also like the $3.87 to $3.88 upside target as the 100% progression of the $3.42 to $3.69 rally from Thursday's corrective low at $3.60 projects a move to $3.87 1/4. On-balance volume (OBV) is bullish and trending higher, a sign bulls are firmly in control the last 20 days.

The rally in November soybeans last week was encouraging but not nearly as impressive as the Monday surge, which has pushed prices right up against the 100-day moving average and the upper boundary of the rising trend channel. In addition, Monday's rally has also pushed through the 61.8% retracement of the $9.22 to $8.12 sell-off at $8.80. The next resistance candidate outside of the 9-handle level would be the $9.07 corrective high from Aug. 20. Similar to corn, OBV in soybeans is bullish and trending higher, a sign bulls have taken control the last 20 days. Momentum indicators are rising but have not yet flashed a potential bearish divergence, something traders will need to be mindful of in subsequent days. Unfortunately, calendar spreads have done little in the last three day's rallies, which is bearish in the short term. The 100% progression of the initial $8.12 to $8.74 rally from the most recent $8.48 corrective low would be $9.09, lining up nicely with the $9.07 corrective high from $8.20.

Minneapolis December wheat has shown trendy, impulsive behavior dating back to the mid-September lows, price action that argues for additional upside strength. Taking a step back to the August highs, it can be argued there was a very clear 5-wave move lower, which was completed with the $5.60 lows on Sept. 13. Therefore, we are trying to determine whether the price action from the Sept. 13 lows to Monday, Oct.15, is a 3-wave corrective affair ahead of new lows, or whether we are in the middle of the third wave of a larger degree 5-wave bull move higher? Holding the initial corrective highs at $5.91 from Sept. 20 on the weakness this past week was a positive. The 100% progression of the $5.60 to $5.91 rally from the $5.72 corrective lows on Oct. 1 projects to $6.02 3/4. Momentum remains bullish. The rising trend channel also argues for further upside. The close on Oct. 12 inched over the 50- and 100-day moving averages with the 200-day up at $6.13. How price and momentum react around the 100% progression at $6.02 should help in navigating the next move in this market.

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 tmcronin31@gmail.com

Follow Tregg Cronin on Twitter @5thWave_tcronin

(BAS/CZ)

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