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    Technical Analysis #C-CORN : 2016-03-25

    Lower plantings expected to boost corn prices

    Corn prices rose on downward revised estimates of plantings in US. At the same time exports from South America are expected to remain strong, which will pressure corn prices. Will the price of corn continue rising?

    Investors are revising downward their estimates of increases in corn sowing areas expecting that farmers will plant more soybeans as November soybeans futures gained 5% this month compared with a 2.7% rise in December corn futures. Thursday forecast by Rabobank estimates US corn plantings will grow 1m-1.5m acres from the 88.4m acres seeded last year. Earlier this week a Societe Generale report estimated corn seedings at 89.0m acres. The US Department of Agriculture initial estimate last month indicated sowings at 90.0m acres, which will be updated next week based on results from a farmer survey. Ahead of this monthly report the estimates indicate plantings below the official 90.m acres forecast even though sowings are expected to rise for the first time in four years. This is a bullish development for corn. At the same time analysts note lower prices for nitrogen fertilizers which may result in higher crops. This will be bearish for corn prices together with strong competition from South American exports and possible 2m-3m tonnes recovery in Ukrainian shipments in 2016-17.

    CORN

    On the daily timeframe CORN:D1 corn price has been trading with a negative bias from October 2015, with 50-day moving average MA(50) below the 200-day moving average MA(200) and declining. The price started rising since the end of February, breaching above the 50-day average and resistance lines. It formed a double top pattern and is retracing toward the 50-day moving average and the resistance line, which acts now as a support. The RSI oscillator is falling, which is also a bearish signal. The MACD indicator is above the signal line, but the gap with it is steady indicating no clear advantage for bulls or bears. The Donchian channel is tilted upward, indicating an uptrend. The Parabolic indicator also gives a buy signal. We believe breaching above the upper Donchian channel and last fractal high at 373.2 will signify continuation of the bullish momentum, which can be used as an entry point. A pending order to buy can be placed above that level. The stop loss can be placed below the Parabolic at 364.8. After placing the pending order the stop loss is to be moved every day following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level at 364.8 without reaching the order at 373.2, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

     

    Position Buy
    Buy stop above 373.2
    Stop loss below 364.8

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