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Options play: Can this bullish breakout in corn prices last?
Does a close above $4/bushel in March corn mean we are on our way?
Fundamentally, according to Hightower morning commentary found at Markethead, “News that Ukraine is struggling to fill all of the 19 cargoes (1.1 million tonnes) of corn sales to China is seen as a positive force as there is talk that they will be unable on near 200,000 tonnes.” The Ukraine of all places is unable to meet China’s demand for corn acting as a bullish fundamental for the market seems odd to me, but the bulls will take it.
That same Hightower report claimed that, “The US continues to see pretty solid export sales data with sales for the week ending December 4th coming in at 962,800 tonnes, down from 1.170 million tonnes last week. As of December 4th, cumulative corn sales stand at 53.3% of the USDA forecast for the 2014/2015 (current) marketing year versus a 5-year average of 55.8%.” So even solid numbers seemed to help the bullish move up and breakout on Friday.
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Technically, I have added my favorite technical indicators to the corn charts below. They are the 9 (red line), 20 (green line), and the 50 (blue line) period simple moving averages or SMA’s. I have also added Bollinger Bands or BB’s (the light blue shaded area) and Candlesticks (the red and green bars). On the daily chart below each bar or Candlestick represents one day of trading and on the weekly chart below each bar or Candlestick represents one week of trading. These few technical indicators tell me 6-12 different characteristics about the market at a quick glance. I have them saved on my charts in MARKETHEAD so they can populate any chart, any market, and any time frame at the click of a mouse.
Also from a technical standpoint this is a big bullish breakout on both charts in my view. We also have what I have coined a “SUPER-TREND” up on both charts. In order to achieve this what we need to have happen first is a cross of the 9 period SMA (red line) up and over the 20 period SMA (green line) as both indicators point higher on a fairly sharp angle while the market itself trades above the 9. Now we have the 9 period SMA as our first area of support, then the 20, and on the daily chart the 50.
On the daily chart below I also want to point out that what I like to pay attention to on the Bollinger Bands is not the light blue shaded area itself, but where the light blue area starts at the bottom and then where it ends at the top. So I have four out of five of my indicators pointing up and they are the 50 day, the 20 day, the 9 day, and the top line of the BB’s. That is extremely bullish to me especially when the market is trading not only above the 9 day, but also above the top line of the BB’s. This could also indicate an overbought environment in corn. However, even though the market could be do for a correction back to to the 9 day SMA or so, markets can remain overbought for long periods of time. At rate I expect higher prices.
I figured this out by pulling up and studying a daily and weekly chart with my indicators by the click of a mouse which I found at: http://www.markethead.com/2.0/free_trial.asp?ap=mmckinne , which is a web application that we have developed for our clients called MARKETHEAD where I get about 80-85% of all my research from. That means I get both technical and fundamental research from this web app and I am a veteran series 3 Broker of 15 years. So if I’m using it then maybe my reader’s should check it out. Yes?
March daily corn chart
Technically, on the weekly chart below as I have mentioned we do have what I call a “SUPER-TREND” up. Also what I find pretty interesting is that we have not had a weekly close above $4/bushel since the week of June 30th. So that is also quite bullish in my eyes. We have the 9 period SMA as the first area of support, the 20 period SMA as the second area of support and the 50 period SMA as resistance on the upside. Good stuff, huh? Overall, with two very bullish charts according to my indicators it looks as though this could be the start of something bigger so I’m looking for higher prices. Maybe after a pull-back and or maybe not.
Super Trend Simple Moving Average Report:
Weekly corn chart
Some good plays I think could be to buy calls or bull call spreads with a put for a hedge or “insurance” in case the trend changes to down dramatically. I would recommend this in a 3 to 1 ratio as always. Calls or bull call spreads have a limited risk and unlimited profit potential.
For exact details on strategies, months, expiration dates, strike prices, and number of positions feel free to contact me at 312-277-0115 or email@example.com .
It is also important to note that I am not married to a market, but to trends. So I make recommendations with options on futures and commodities like the energies, metals, currencies, softs, financials, and more. So whether you are a hedger or a speculator I believe I can help by putting together strategies and recommendations present them to you, then as always leave the final decision in your hands. We work as a team. Also recommending when to get in and when to get out while watching the trade every step of the way as I keep you updated personally. May all the best trades be yours and mine.
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