March Corn is up 12 ¾ cents at $4.04 ¾ this morning as I write on a weaker dollar. The included chart shows that yesterday, March Corn fell sharply into the 40 day moving average and has now reversed off of that level. The directional movement indicators are right on top of each other poised to turn bearish. That may change if today’s rally can hold by the close. The ADX line is still falling suggesting no real trend for the near term. It is clear on the chart that very good support for prices has consistently come in around the 40 and 90 day moving averages over the past month. As a matter of fact, over the past month, when prices tested those two averages, prices rebounded sharply off of those lows. The problem for the bulls is that every time prices get a little above the $4.00 area, corn seems to hit a brick wall. I read that it is the futures funds that are the buyers near the low prices and farmers who are the sellers near the highs. Without more evidence as to the condition of the remaining corn crops, farmers are getting nervous and are choosing to sell some of their harvested crops. To me the trend in corn still strong to the upside until the 40 and 90 day exponential moving averages are broken on a closing basis. The longer that corn trades in this $3.70 to $4.25 range, the bigger the break out will be when it comes. I recommend staying with our current option positions.
Followers of this letter should be short 1 March Corn ($3.20 strike) put option from 6 ½ cents, and long one March Corn ($4.30 strike) call option from 17 ¼ cents and short 2 March Corn ($4.90 strike) call options at 7 3/8 cents each. There are 86 days left until March options expire.
With all the price tests above $4.00 recently, I would hope that the producers have already liquidated most if not all of their corn that needs to be sold.
David Hall
The information and opinions contained herein comes from sources believed to be reliable, but are not guaranteed as to accuracy or completeness. The risk of loss in trading futures and/or options can be substantial. Each investor must consider whether this is a suitable investment. When trading futures and/or options, it is possible to lose more than the full value of your account. All funds committed should be risk capital. Past performance is not necessarily indicative of future results.
This newsletter is not intended for dissemination to the public without prior approval from David Hall.
