Technically Speaking

Row Crops Sitting on High Range, Wheat Attempting to Build Base

March corn continues to respect the gap left on daily charts between 3.78-3.80. The 50- and 100-day moving averages are converging on the top end of the gap near 3.80.

March corn has continued to consolidate inside of its two-month range, although recent trade has brought price back to the high end of that range. Prices have respected the gap left on the daily chart from $3.78 to $3.80, which is where both the 50-day and 100-day moving averages reside currently. There is no evidence that March corn is ready to breach the top end of this range as volatility remains low at 11.23% the last three weeks. In addition, 20-day on-balance-volume (OBV) bottomed at 455,561 contracts on Nov. 26, the day before price bottomed. Then it rose along with price until Dec. 4, peaking at 484,321 contracts before declining the last three sessions. This would seem to imply bullish enthusiasm as measured by volume is declining as prices have rallied. Fortunately, momentum indicators are not yet diverging from price but are worth monitoring. More important is the $3.80 risk parameter, a breach that would signal an end to the short/intermediate-term uptrend and more whipsaw trade in the two-month range.

Similar to corn, January soybeans have also respected the gap left from last Sunday's open, although one serious attempt was made to close it on Dec. 6. Many of the same bullish technical factors are working for January soybeans at the moment with surging OBV, and the stochastic measure of momentum, which is not yet diverging from price. The January contract is trading near the midpoint of the 100-day and 200-day moving averages, however, the most important upside target for Jan beans is the $9.32 corrective high from July 31. Before worrying about the $9.32 corrective high, soybeans would do well to trade definitively above the 38.2% retracement of the $10.63 to $8.26 sell-off at $9.16 3/4. As noted above, momentum indicators are not diverging from price, which would be a textbook warning signal as price sits at a major resistance candidate like the 38.2% retracement. Volatility is fairly mundane and rangebound. From an hourly perspective, this market is providing us two very clear and present risk parameters from which to gauge the next segment of trend. To the upside, we will use the $9.23 3/4 risk parameter from Dec. 2, and to the downside the $8.97 corrective low from Dec. 6. A breach of either of these levels should be definitive enough to move to a more aggressive stance in either direction.

After notching new contract lows at the end of November, March Kansas City wheat attempted to revisit those lows last week before a strong surge Friday. Friday and overnight's highs took out last week's high, technically flipping short-term trends higher. That said, a mountain of upside resistance exists above this market for bulls to try to overcome. Momentum indicators are rising, and not yet diverting from price as new highs are made, a feather in the cap of bulls. The corrective high from the end of October at $5.36 would be the next logical candidate for resistance, although before that, the 50-day moving average sits at $5.20. Along with the 50-day, the 23.6% retracement level of the $6.44 to $4.82 sell-off also sits at $5.20, creating a unique resistance candidate. OBV is bearish, but trending strongly higher as would be expected in a market that made a contract low and held on to retest efforts.

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

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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.

(BAS\SK)

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