Corn futures traded in a key price area last week, following the extended period of sideways congestion, which has seem the market move sideways for much of the summer, between $830 cents per bushel to the upside, and the $780 cents per bushel to the downside. Both these levels have been clearly defined on the daily chart, particularly to the upside, where a series of pivots gave us several signals of weakness for the commodity, which was finally confirmed in last week’s trading.
The first sign of a change in trend came on the daily chart, with the trend changing color from white to red, signaling a move from sideways congestion to a bearish trend. This move was also confirmed with the daily volume, with high volume selling bars appearing throughout the week, and confirmed on Thursday with a change in our trading indicator. Moving to the three day chart, the trend here has yet to change to red, but has already transitioned from a bullish green trend to a white trend in congestion, once again suggesting that the longer term trend is also changing, and likely to confirm the trend on the daily chart in due course. This is also confirmed with selling volume on the three day chart at the end of last week’s commodity trading session. Finally, our trading indicators also delivered an aggressive entry signal to the short side on Thursday last week with the December corn futures contract closing on Friday at $782 cents per bushel.
For this trend to continue and develop for the longer term, we now need to see a clear break and hold below the $780 cents per bushel level, which will then provide a strong level of resistance above, and add further weight to the downwards momentum. The technical picture for corn is also reflected in other soft commodities such as oats, which are also consolidating sideways and now adopting a bearish tone in the short term.
In last week’s USDA report, the department cut it’s forecast for the corn harvest as the severe drought in the Midwest continued, but despite this news, the price of corn futures moved lower, failing to pick up any bullish momentum on the back of the release. The forecast suggested that the projected crop would be the smallest since 2006, but many market analysts believe that these prices have now been factored into the market in the recent bullish rally. The report highlighted similar issues for soybean, with the report also cutting forecasts here also, with this harvest forecast to be the smallest since 2003, and with the market now starting to turn bearish, as for corn.
By Anna Coulling