A game of two halves for soft commodities

Corn - daily chart
Corn – daily chart

Last week’s price action across the soft commodity sector can best be described as one of a modest recovery, punctuated by volatile price action towards the end of the week with the trigger being the WASDE report. The release was one of mixed messages, suggesting that the actual harvest might come in lower than anticipated, whereas the market has been geared to the expectation of record yields. In addition the weather too has played its part in last week’s modest recovery as the rains moved in and slowing harvesting many of the growing belts.

From a technical perspective last week was a game of two halves, with the early promise of a possible recovery duly snuffed out towards the end of the week, suggesting this was simply a minor bounce in the longer term downwards trend, with corn, soybean and wheat all reflecting similar price action on the daily charts.

If we start with corn, the initial rally was associated with positive wide spread up candles on rising volume, as prices moved back to test resistance in the 338 to 344 per bushel area. However, Thursday’s candle suggested weakness as the high of the session tested and failed at the resistance level in the 348.50 region. This was a price point that was tested again on Friday before moving sharply lower to close the week at 334 per bushel on high volume signaling bearish sentiment returning once again. In early trading this morning, and with the markets closed for Columbus Day celebrations, trading has been muted with the commodity oscillating in a tight range in the 333 per bushel region.

Wheat - daily
Wheat – daily

Wheat followed much the same pattern of price action, with Wednesday’s doji candle testing the resistance level in the 510 per bushel region, before weakness on Thursday and Friday duly tested and failed to hold at these levels once again. Friday’s candle with a deep upper wick also suggests further weakness in the short term, given the depth of the upper wick, the resistance now overhead, and the strength of the volume which failed to move the market higher in the trading session. As with corn, this morning’s trading session has been muted in the electronic market with the commodity holding below the 500 per bushel region to trade at 496.75 at the time of writing.

Soybean - daily
Soybean – daily

And so to soybean which perhaps gave the clearest signals of all three, with Tuesday’s shooting star candle associated with high volume and consequent pivot high, duly validated later in the week as the commodity failed to breach the psychological 950 per bushel region, before closing on Friday sharply lower with a wide spread down candle and ultra high volume. The market is now testing the $910 to $920 per bushel area once more and any move through here in the short term, may see further weakness for soybean and indeed the other grains in due course.

Finally, the CRB index continues to remain bearish closing down once again on Friday at 275.60, 0.29% on the day, and with the US dollar continuing to remain firm, the supply demand equation continues to dominate.

By Anna Coulling

About Anna 1040 Articles

Hi – my name is Anna Coulling and I am a full time currency, commodities and equities trader. I have been involved in both trading and investing for over fifteen years and have traded many different financial instruments, from options and futures to stocks and commodities. I write and publish articles ( mostly for free ) for UK and international publications on a wide variety of financial issues, and in particular I enjoy helping others learn how to invest and trade.

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