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Technical analysis: corn, wheat futures

10/30/2012 @ 9:34am

DECEMBER CBOT CORN, combined pit and electronic trading

December Chicago Board of Trade corn futures closed little changed Monday, as much of the financial trading community ground to a halt as Hurricane Sandy lambastes the East Coast and has shut down stock and bond trading in the U.S. Monday and Tuesday.

In the news Monday, Ukraine asked China to grant it corn export allocations for next year after agreeing an innovative loan-for-crops contract, according to the country's agriculture ministry.

While December corn traded both higher and lower intraday Monday, the market couldn't maintain strength or weakness. On the downside, the contract touched major chart support at $7.32 1/4, previous support from the Oct. 15 daily low. That represents the lowest price level since Sept. 28 and major technical chart support on the downside. Fresh fundamental news would likely be needed to trigger a sustained sell-off under that price floor. Traders are waiting for official news on the final size of the U.S. corn harvest, and that could be the fundamental trigger for the next big price move.

Strong underlying cash prices for corn have also been a recent support to the futures market. Amid the smaller crop size, in the wake of this summer's historic drought, and because the current harvest is nearing its end, buyers have faced higher prices for physical corn in the cash markets.

Since Oct. 1, December corn futures have largely been locked in a large sideways range between major resistance at $7.76 and support at $7.32 1/4. The market is now hovering near the range bottom. Market action has been heavy in recent sessions, with corn bulls unable to defend rallies. Strength has been viewed as a selling opportunity.

Traders should continue to watch action closely around $7.32 1/4. Given volatile and thin Hurricane trading conditions, whipsaw risk is seen. It would take sustained losses and a close or two under the $7.32 1/4 level to confirm a downside breakout. If that occurs, it would represent a major downside breakout from October's price range, and would unleash a fresh selling wave on the downside.

The first major technical target on the downside on a break of $7.32 is the $7.05 floor. On the upside, short-term resistance lies at $7.49 3/4. If the market climbs back above that level early this week it would keep the sideways range trade intact and target a drift back toward the range top.

$8.43 3/4 -- the contract high

$7.49 1/2 -- the 10-day moving average

$7.49 3/4 -- the 20-day moving average

$7.56 1/2 -- the 40-day moving average

$3.86 3/4 -- the contract low

DECEMBER CBOT WHEAT, combined pit and electronic trading

December CBOT wheat futures pushed lower for the third session in a row on Monday. Early on Monday, wheat futures edged higher amid intraday strength in corn, but neither market held gains at the final bell.

Fundamentally, wheat traders continue to watch for signs of fresh export demand. Overall, commodity futures saw lackluster activity Monday, as much of the trading community remained focused on Hurricane Sandy, which is pounding much of the Eastern seaboard.

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