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Corn bears break minor uptrend pattern -- technical analysis

12/27/2013 @ 8:16am

March Chicago Board of Trade corn futures plunged lower on Thursday, pressured by favorable weather conditions in South America, which are expected to bolster the currently growing corn crop there. Additionally, corn came under pressure following a report that China had rejected a U.S. shipment of dried distillers grains, which is a corn by-product, due to an unapproved genetically modified corn strain. The report heightened concerns that China could reduce its U.S. shipments in the months ahead.

Technically, the March corn contract remained within recent ranges. But, the selling broke a very minor short-term uptrend pattern, and took the contract back under the 10- and 20-day moving averages. Those moving averages will now act as minor near-term resistance points.

Longer term, the technical trend remains solidly bearish. Corn has been in a long-term bear market from the September 2012 peak. Medium term, the market has shifted into a neutral sideways trend since hitting the contract low at $4.18 1/2 on Dec. 2. Neutral choppy sideways trade has been seen during December between that low and strong chart resistance at $4.40 3/4, the Dec. 10 high.

Momentum has rolled lower and will support downside testing near term following Thursday's sell-off. Initial support lies at $4.20 1/2, ahead of major support at $4.18 1/2.

  • $6.70     -- the contract high
  • $4.29 1/4 -- the 10-day moving average
  • $4.30 3/4 -- the 20-day moving average
  • $4.32 1/4 -- the 40-day moving average
  • $4.18 1/2 -- the contract low

MARCH CBOT WHEAT, combined pit and electronic trading

March CBOT wheat slid to a new contract low early on Thursday, touching psychological support at the $6.00 mark. But, then bargain hunting and profit-taking emerged, which allowed the contract to erase the majority of the day's losses and close only marginally weaker.

The trend on all timeframes is bearish. But, March wheat has seen relentless selling pressure in recent days and is oversold and due for a corrective bounce or a period of sideways consolidation as the market digests the recent losses. Thursday's low at $6.00 3/4 is now important short-term support and could act as a minor floor. A possible bullish momentum divergence could be forming, but has not yet been confirmed.

Initial resistance lies at $6.16 and then $6.21 1/4. The bulls would need to make some progress on the upside to suggest a correction or consolidation period was beginning.

If the bears push wheat back under the $6.00 mark, another downside target comes in at $5.91 1/4, the May 11, 2012 weekly continuation chart low.

  • $9.12 1/4 -- the contract high
  • $6.16 1/4 -- the 10-day moving average
  • $6.36     -- the 20-day moving average
  • $6.49     -- the 40-day moving average
  • $6.00 3/4 -- the contract low

MARCH KC WHEAT, combined pit and electronic trading

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