Daily Grain & Cotton Commentary (2.13.20)

Published on: 08:06AM Feb 13, 2020

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Breaking: China’s Hubei province reported 14,840 new cases of coronavirus last night, which renewed the risk off trade in the outside markets overnight. The situation remains very fluid, we are in the camp that the number of cases reported is grossly underestimated.

Note: The shot clock is winding down on March futures so we will be shifting to May futures in our daily reports by the start of next week.

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Corn (March)

Fundamentals: March corn futures managed to rally yesterday as shorts started to cover positions on the inability to break lower on a bearish USDA report on Tuesday. We classify this as a “fundamental rejection”, meaning there was reason to break the market lower over the past two-days, but the market held firm, indicating that majority of the bearish news has been baked into the cake. We believe a fundamental rejection is significant, in this case it is bullish development, prompting us to send out an email yesterday afternoon. Weekly export sales this morning came in at 968,800 metric tons, 22% below last week’s report and 9% below the 4-week average.

Technicals: The market is still technically range-bound, but we saw yesterday’s price action as extremely encouraging, setting up for what we see as a good risk/reward situation to the buy-side. With that said, there is still some work to do on the charts. First resistance comes in from 384 ¾-387 ¼, consecutive closes above here could spark a bigger rally. The must hold support pocket is 375 ¼-377 ¾. With the shot-clock winding down on the March contract, you may want to consider using the May contract.

Bias: Bullish

Previous Session Bias: Neutral

Resistance: 392-394 ¼***, 407 ¾-411 ¾****

Pivot: 384 ¾-387 ¼

Support: 375-377 ¾***, 365-365 ¾****

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Soybeans (March)

Fundamentals: March soybean futures managed to close higher, again. Yesterday’s session had more conviction behind it with a higher participation rate, in terms of volume. The market gave back some gains in the overnight session as coronavirus fears throw a wet blanket on things, but we still feel there is opportunity for prices to work higher from here. Weekly export sales this morning came in at 644,800 metric tons, down 8% from last week, but 2% above the 4-week average.

Technicals: The market was able to close above our resistance pocket from 888 ¼-890 ½, the bulls will now want to defend this pocket in the coming sessions. This pocket represents the breakdown point from January 30th and a key retracement. If the bulls can continue to defend support, we could see the March contract grind back towards the psychologically and technically significant $9.00 handle.

Bias: Bullish/Neutral

Previous Session Bias: Neutral

Resistance: 900-905 ¾***, 920-924***

Pivot: 888 ¼-890 ½**,

Support: 875-880****, 865-867 ¾**, 841 ½****

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Chicago Wheat (March)

Fundamentals: This morning’s weekly export sales came in at 643,100 metric tons, up 90% from the previous week and 10% above the 4-week average. The surge in the US Dollar may continue to be a headwind for wheat futures, which historically seem to be more closely correlated relative to the other grains.

Technicals: Chicago wheat futures staged a relief rally yesterday, taking prices to our resistance pocket from 548-551 (previous support now becomes resistance). If the bulls can chew through this pocket, perhaps we see an extension towards 560, but we still believe the bears have the advantage and are looking to resell relief rallies.

Bias: Bearish

Previous Session Bias: Bearish

Resistance: 548-551***, 560 ½-566****

Support: 538 ½**, 520-525****

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Kansas City Wheat (March)

Technicals: Kansas City wheat futures managed to hold the 50-day moving average again, an indicator that has been tested for 11 consecutive sessions now. Prices are consolidating and with the bears holding the advantage, we could see that set up for another leg lower. Our pivot-pocket remains intact from 468 ½-471. This pocket contains the 50-day moving average and the 50% retracement from the June highs to the contract lows.

Bias: Neutral/Bearish

Previous Session Bias: Neutral/Bearish

Resistance: 474 ¾-477****, 488 ½-490 ½**, 498-500**

Pivot: 468 ½-471

Support: 453 ¾-457 ¾***, 435 ¼-437 ½**

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Cotton (March)

Fundamentals: Weekly export inspections came in at 350,900RB, a marketing year high. This is up 6% from last week and is 15% higher than the 4-week average. The shot clock is winding down on the March contract so we will be moving to May in the coming reports.

Technicals: The market has been consolidating higher for the better part of the last week but lacks conviction and appears to be setting up for a potential bear flag. A break and close back below our pivot pocket from 67.80-68.00 could accelerate the selling and take us to new lows on the move.

Bias: Neutral/Bearish

Previous Session Bias: Neutral/Bearish

Resistance: 69.00**, 70.92**, 71.96**

Pivot: 67.80-68.00

Support: 63.70-64.02***

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.