TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.
Just a few days into the New Year and corn has made a push back toward the high end of the trading range it has been stuck in for the last 6 months. Just in the last 5 trade sessions marchcorn has rallied from the mid 340s back to the low 360s. This comes at an interesting time of year as January and February can be heavy months for corn. Can corn break out above the high end of the range where it has previouslyfailed time and time again?
The high for March corn in the last 6 months has been 369. On Thursday March corn got to a high of 362 3/4, just over 6 cents from the high. Just last week corn looked like it was about to fall off a cliff and go test contract lows. The turn around has been impressive. But will it last?
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From a technical perspective the corn chart looks very interesting right now. Corn potentially has what is called an inverse head and shoulders formation setting up, which is seen as a good set up for higher prices. In order to negate this positive technical set up March corn would need to close below 345. However, corn does have layers of resistance above as it has tried and failed many times to break out over 370. If corn were able to get through the layers of resistance there is pretty thin trade up to just over 385.
From a fundamental point of view it is hard to argue that corn prices need to break out to the upside given what we know right now. There are a few things that could give corn the boost it needs to go higher but it is too early to say if they will. For example a South American weather problem that did significant damage to their corn crop would certainly be bullish for corn. Or, if the USDA lowered 2016 corn production by lowering yield or acreage or both. But for the moment all of this is yet to be seen. While we have had some hints of South American weather issues there has been nothing to say that this crop is permanently damaged at this point. We will have to keep a close eye on South American weather for a few months yet.
Short of a South American weather problem or a big surprise from the USDA on 2016 production it is tough to imagine corn going sharply higher from here, especially in this time frame. In many years corn has been under significant pressure in the months of January and February as we takeaway South American weather concern and, with a big carry over, have little reason to try to add corn acres. So producers should take note of the recent strength in corn. This may be a good selling opportunity here. It might make sense to wait a few days to see how this plays out before getting too aggressive, but it is a good time to have the "finger on the trigger" so to say.
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Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action. Ted Seifried - (312) 277-0113. Also, feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.Follow me on twitter @thetedspread if you like.
MarchCorn Daily chart:
JanuarySoybeans Daily chart:
Producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.
In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!
Ted Seifried (312) 277-0113 or firstname.lastname@example.org
Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie
Futures, options and forex trading is speculative in nature and involves substantial risk of loss. This commentary should be conveyed as a solicitation for entry into derivitives transactions. All known news and events have already been factored into the price of the underlying commodities discussed. The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.
FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.