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TECHNICAL ANALYSIS


Corn Flaked

10/13/09 08:55:30 AM
by Austin Passamonte

Here's a short-term to near-term view of corn futures.

Security:   Corn Futures (ZC)
Position:   N/A

Whereas soybean futures have recovered much of the high–low range drop from 2008, corn futures have not even begun to lift themselves off the proverbial mat. Crude oil's price collapse yanked the ethanol market demand out from beneath this market, coupled with a near-record new crop harvest forecast for 2009. See Figure 1.

FIGURE 1: ZC, WEEKLY
Graphic provided by: TradeStation.
 
It will take a herculean effort to rise back toward the $5 level where a historical open gap meets 38% of the trend high–low retracement; $3 to $4 has been the former support now resistance price-channel range since late last year. It looks like $4.50 to $5+ will be the heavy layers of congestion above to chew through. See Figure 2.

FIGURE 2: ZC, DAILY
Graphic provided by: TradeStation.
 
A peek at Figure 3 sees the venerable $3.50 per bushel as pivotal price magnet since July. A sympathetic push away from that led by beans has not mustered much upside energy yet. Two of the last three daily price bars have been doji candles of indecision — or indifference.

FIGURE 3: ZC, DAILY
Graphic provided by: TradeStation.
 
Taking the same daily chart view and adding price projections off most recent 1-2-3 swing shows 3.80s to 4.80s as potential points of attraction. Any way we grind it, the path from present levels to the $5 bushel level is littered with layers of resistance between.

From a pure technical standpoint alone, corn is the weak sister to beans right now by a wide margin, and fundamental forecasts support the same. Long beans/short corn is the overall spread bias, especially so if and when soybeans pull back while corn holds ground to narrow the present spread value. Crude oil prices are the most probable catalyst to push corn prices via biofuel demand, but those levels are a long way from returning to wildly speculative peaks of 2007–08.



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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Date: 10/14/09Rank: 4Comment: 
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