IFC Markets - Analytics

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    Technical Analysis #C-CORN : 2016-07-04

    Corn declines as acreage rises

    Corn prices declined in US with improving weather and reduction in corn net long contracts by managed funds. US Department of Agriculture’s National Agricultural Statistics Service (NASS) revised upward its estimate of June corn acreage and stockpiles compared with last year. Will the price of corn continue falling?

    The US Department of Agriculture’s National Agricultural Statistics Service (NASS) estimated US corn acreage rose 7% from last year to 94.1 million acres, making it the third-highest corn planted acreage since 1944. Growers expect to harvest 86.6 million acres for grain. If realized, this will be the third-highest acreage harvested for corn grain since 1933. NASS also released the quarterly “Grain Stocks” report Thursday which estimates 4.72 billion bushels of corn were stored in the US as of June 1, a 6% increase from June 1, 2015. Another bearish development for corn is the reduction in the net long contracts in futures and options in the top 13 US -traded agricultural commodities, including corn, by more than 60,000 contracts in the week to last Tuesday, according to data from the Commodity Futures Trading Commission. This was the first cut in a month in the net long. Net longs in corn were cut by 27468 contracts. Improved weather in US and ample supply of feed wheat, a substitute for feed corn, also contributed to decline in corn price.


    On the daily timeframe CORN:D1 has been correcting downward after hitting an eleven-month low since July 12, 2015 in mid-June. The price has breached below the support line of the uptrend and 200-day moving average MA(200), falling also below last fractal low. The Donchian channel is tilted downward, indicating downtrend. The Parabolic indicator has formed a sell signal. The RSI oscillator has fallen below the 50 level and reached the oversold zone, which is a bullish signal. The MACD indicator is below the signal line and the gap is widening, which is a bearish signal. We believe breaching below the lower Donchian boundary at 360.1 will signify continuation 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 401.4. 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 (401.4) without reaching the order (360.1), we recommend cancelling the position: the market sustains internal changes which were not taken into account.

    Position Sell
    Sell stop below 360.1
    Stop loss above 401.4

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