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TECHNICAL ANALYSIS


Plowed Up

05/02/11 08:27:06 AM
by Austin Passamonte

Here's a midterm outlook for soybean and corn futures markets.

Security:   ZS, ZC
Position:   N/A

Spring planting time for grain crops is upon us. Well, more or less. The nationwide wetness and in some cases outright flooding have kept farmers across US mostly away from their fields for the time being. If dry weather prevails, however, there is plenty of time to get the corn crop in. Any great delays in planting might see acreage shifted from corn to soybeans, which require a shorter season and tolerate a later growing one.

FIGURE 1: SOYBEAN FUTURES, DAILY
Graphic provided by: NinjaTrader.
 
A reflection of confusion and uncertainty exists in the daily chart of soybean (ZS) futures (Figure 1). Generally speaking, price has rolled through a wide range that's wedged over the past several months. Sideways volatility is the best way to describe what we've seen so far.

FIGURE 2: SOYBEAN FUTURES, WEEKLY
Graphic provided by: NinjaTrader.
 
Backing out to a weekly chart (Figure 2) shows a general uptrend that's gotten rather noisy of late. It's pretty clear that price action is preparing for a breakout or breakdown soon. Upside breakout heads to new recent highs, while a downside dip should pause or halt at the long-term trendline.

FIGURE 3: CORN FUTURES, DAILY
Graphic provided by: NinjaTrader.
 
Corn futures have been considerably noisier in the past two months, with quite a volatile ride from 740 down to 610 and back up to 770s again (Figure 3). April has pretty much created one overall bull flag formation at the recent highs. A break upward heads higher, while any dip lower will test the double-bottom lows near 730 at the bottom of this flag formation.

Spring planting is a seasonally volatile time for grain futures markets. A lot of wheat acreage actually results in corn, beans, or some other crop depending on the whims of mother nature's weather. Sudden changes or extended patterns in weather can create dramatic price shifts in grains. For now, we watch the lines of demarcations on our charts, and believe what we see relayed in price action as it unfolds ahead.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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