Technical Tuesdays -- Head and Shoulders?
Nov 22, 2011
In today’s Technical Tuesday installment, we will examine the DEC corn chart and the
interesting formation that is near completion. Below is a snapshot of the DEC corn chart
taken from our Firetip trading software.
As you can see, we started this head and shoulders pattern in mid-May of this year.
Buyers eagerly came into the market forcing corn up to the first peak, known as the left
shoulder. Then, sellers came in at the highs pushing the market to the June 30th lows
establishing the neckline. Buyers returned and drove the market all the way up to 779
on August 29th forming the head. The buying dried up sending the market down to
the neckline near 575 on October 3rd. Tentative buying re-emerged to create the right
shoulder before falling again towards the neckline. Volume is important when examining
a pattern such as this head and shoulders formation.
Big volume forced the market to the left shoulder, diminishing volume formed the head,
and the right shoulder was formed on even lower volume, evidence that buyers have
exhausted themselves. This pattern will be complete if we break through the neckline in
the 575 area comes on increasing volume. To give our Firetip software a try, please take
a demo by clicking the button below.
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