IFC Markets - Analytics

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    Technical Analysis #C-CORN : 2016-05-09

    Corn prices fall as sowing accelerates in US

    Corn prices declined as US sowing accelerated with improving weather in US. International Grain Council revised upward its forecast for next season's global production of wheat and corn. Will the price of corn continue falling?

    Corn had been rising recently due to concerns about the negative impact of hot dry weather on South American corn crop. Last week the International Grain Council revised upward its forecast for next season's global production of wheat and corn. Prospects for the world corn crop were upgraded by 5m tonnes to 998m tonnes while consumption estimate was cut by 5m tonnes. This is a bearish development for corn. On May 10 US Department of Agriculture will publish its monthly World Agricultural Supply and Demand Estimate, which will provide a fresh estimate of corn output. Prices declined in the last couple of days as weather improved in US, allowing farmers to accelerate the pace of sowing of corn. US Energy Information Agency data showed stocks of corn-based biofuel rose even as production fell, adding to downward pressure for corn prices. Investors are also watching developments in China’s agricultural reform after China said in March it would end its corn stockpiling program which had driven up domestic prices. Corn planting area rose to 37 million hectares last year from 23 million hectares in 2001 in China as farmers were paid fixed prices for corn, with the state ending with close to 250 million tonnes of corn stockpiles. Investors are concerned that China would export surplus corn as domestic prices fall to international market level.

    CORN

    On the daily timeframe CORN:D1 corn price has been trading with a negative bias from October 2015. The price started rising since the beginning of April, breaching above the 50-day and 200-day moving averages MA(50) and MA(200) and the resistance line. It is correcting downward currently, and has broken and closed below the support line of the recent uptrend. The Donchian channel is flat, indicating no clear signal for trend direction. The Parabolic indicator gives a sell signal. The RSI oscillator has edged below the 50 level which is also a bearish signal. The MACD indicator is above the signal line, but the gap with it is narrowing, which is a bearish signal. We believe breaching below the lower Donchian boundary and last fractal low at 371.5 will signify resumption of the bearish momentum. It can be used as an entry point and a pending order to sell can be placed below that level. The stop loss can be placed above the last fractal high at 394.8. 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 394.8 without reaching the order at 371.5, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

     

    Position Sell
    Sell stop below 371.5
    Stop loss above 394.8

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