Technical Analysis #C-CORN : 2016-08-16

Corn continues advancing following soy and wheat

Corn is struggling for growth following wheat and soy. There is no much reasonable basis for it yet but from the standpoint of technical analysis the signals to buy have appeared. Will the corn prices continue advancing?

Demand for soy rose significantly in China. The wheat crops in Europe were hit hard by floods this spring. On the contrary, neither strong negative nor heightened demand is seen for corn. Its harvest in US may hit a fresh historical high of 15.2bn bushels with 175.1 bushel output per hectare which is 1bn bushels above the previous record of year 2014. By the way, soy crops are also expected to reach new highs, yet soy prices are rising amid heightened demand from China. Corn exports are not that high yet. USDA forecasts its exports from US may even contract this week to 1.1-1.3mln tonnes from 1.45mln tonnes a week earlier. Corn prices hit a fresh 7-year low on fundamental factors on Friday having slumped to the contract low of the day but not they are already showing technical growth and maybe even upward reversal. Let us see which factors will overweight, technical or fundamental ones.

Corn

On the daily chart Corn: D1 has hit a fresh 7-year low and started correcting upwards. It surpassed the last fractal high and the resistance of the downward channel. The MACD and Parabolic indicators have formed signals to buy. The Bollinger bands have narrowed which means reduced volatility. The lover band is tilted upwards. RSI has left the oversold zone and approached the level of 50 having formed positive divergence. The bullish momentum may develop in case the corn prices surpass the three upper Parabolic signals at 340. This level may serve the point of entry. The initial stop-loss may be placed below the Parabolic signal and the 7-year low at 319. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 319 without reaching the order at 340, we recommend cancelling the position: the market sustains internal changes which were not taken into account.