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TECHNICAL ANALYSIS


Crushed Soy

10/03/11 11:33:35 AM
by Austin Passamonte

Here's the midterm outlook for ZS soybean and ZC corn futures.

Security:   Grain futures
Position:   N/A

The grain complex in commodity futures have enjoyed substantial price rallies in the past year or so. But sideways consolidation near peak highs through much of 2011 has set the stage for continued legs higher or pullbacks to test, back, and fill lower zones below. See Figure 1.

FIGURE 1: ZS, WEEKLY
Graphic provided by: NinjaTrader.
 
Standard technical analysis measurement of weekly chart pennant formations projected price targets right where resting price is today from the recent break lower. That does not mean by any means that lower potential price movement cannot or will not happen -- just that price has reached a technical point of reactionary pause. See Figure 2.

FIGURE 2: ZS, WEEKLY
Graphic provided by: NinjaTrader.
 
Applying a 1-2-3 Fibonacci retrace from double-top highs and swing low between projects into the lower 1100s where wide-range bars were formed back in October 2010.

FIGURE 3: ZC, WEEKLY
Graphic provided by: NinjaTrader.
 
The same view of corn futures (ZC) shows pretty much a lock-step movement unfolding. Double-top high sells off hard, pauses at 100% projection, and looks toward the 450-500 zone where last October's volatility beckons a retest to confirm support. See Figure 3.

Grain futures are heavily buffeted at this time of the year by old-crop storage = new-crop harvest supplies in addition to US dollar valuations, which affect global demand and pressures on pricing. With widened daily limit moves and heightened global economic uncertainty, grain futures could easily see limit-down moves to lower zones of support without further warning.



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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