December Corn: Dead-Cat Bounce Or Start Of An Extended Price Correction?

March 13, 2013 01:43 AM

What Traders are Talking About:

* New-crop corn: Dead-cat bounce or start of an extended correction? December corn futures posted a third consecutive higher close Tuesday. Because corrections typically come in three-day waves, price action the next couple days could be a key sign if this was just a typical corrective bounce or if the market has put in a solid short-term low. Bulls have a lot of work to do to extend the bounce from last week's lows. December corn futures must first push through downtrending resistance drawn off the December and February highs, which intersects around $5.64 today and drops about 1 1/4 cents each day thereafter. Above that level, resistance stands at the January double-bottom at $5.70 and then the 50-day Moving Average, which is currently at $5.72.

The long and short of it: With so much tough overhead resistance, the move higher in December corn is likely temporary. But if key resistance is cleared, it would likely spark active chart-based buying.

* 'RINsanity' hits ethanol industry. The price of Renewable Identification Numbers (RINs) have exploded recently, moving from around a nickel per gallon to start the year to a recover of over $1 per gallon on Monday. But the volatility moved to a new level yesterday, with RIN prices plunging into the mid-60-cent range before rebounding into the low 90s late yesterday afternoon. The extremely volatile price action has sparked much debated between the oil and the ethanol industries over who's to blame for the price rise. The oil industry blames "unintended consequences" of the government ethanol mandate for the surge in RIN prices, while the ethanol industry says it's "big oil" that is driving prices higher. Abundant ethanol stocks seem to suggest the surge in RIN prices has more to do with the oil industry than ethanol.

The long and short of it: While the battle over who's to blame continues, RIN prices will remain historically high (and volatile), which will keep ethanol in the public's eye. Ethanol should brace for the next wave of bashing.



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