Austin Galt
The Voodoo Analyst
Corn has just broken support so there looks to be a bit more downside in store before a more solid bear rally takes place.
Firstly, let’s briefly look at the fundamental factors. The main factors causing the price of corn to drop recently appear to be an oversupply of corn combined with the recent outbreak of bird flu or avian influenza.
The psychological effect of this oversupply of corn is likely to be exacerbated by the bird flu. Birds just love eating corn whether it’s cracked or whole kernels. They can’t get enough of the stuff!
This brings in the fear factor in that potential buyers of corn may hold off until the environment is more stable. It is this fear factor that I believe will provide a great buying opportunity in the very near future.
To find out where this great buying opportunity might be, let’s check out the technicals using the daily chart.
CORN DAILY CHART
We can see the previous double bottom was support and this level, denoted by the horizontal line, has just been busted which augurs for lower prices.
The PSAR indicator has a bearish bias with the dots above price with recent rallies unable to crack that resistance.
The Bollinger Bands show price recently finding resistance around the middle band and is now back down at the lower band. Think price can continue south and hug the lower band.
The RSI is very weak and has made a new low. I would like to see the final low accompanied by a bullish divergence.
The Stochastic is also looking weak and perhaps the final low will also set up with multiple bullish divergences.
How low is price likely to trade?
I have added Fibonacci retracement levels of the move up from October 2014 low to December 2014 high and I am now targeting the 76.4% level at US$341.56 to see in the low.
I have also drawn a Fibonacci Fan and I would like to see price find support at the 88.6% angle. Perhaps price will nudge a bit below there. Let’s see.
Once the pullback low is in place I favour a big bear rally to occur with final price high targets outlined in a recent article titled Corn On The Bob.
The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors. Put simply, it is JUST MY OPINION.
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