Why You Should Care About the Narrow Trading Range
May 27, 2014
During the past decade, within the final 12-months of the DEC contract expiration, the price range from high to low has averaged around $2.20 per bushel. As of right now the range in the final 12-months of the DEC14 contract is just $0.82 cents. This from the low at $4.35 set back on Jan 10th, 2014, to the high of $5.17 set on April 9th, 2014.
Based on past history this would be an extremely "narrow" trading range for the DEC contract. My hunch is there are more extremes to come during the remaining few months of the contract.
Example: A $2.20 cent trading range could be something like a low of $3.90 (possibly coming up during the next few weeks on near optimal growing conditions or a down move closer to harvest), followed by a high of $6.10 (perhaps on news of an early freeze, severe flooding or production hiccups in China).
Remember, back in 2012 we posted our lowest close in over a year at around $5.50, the last week in May, only to turn it around and trade above $8.40 by early-Aug. Point is we seem to be in a very tight trading range in comparison to what we have seen the past few years.
I am willing to bet we see the range widen extensively during the next six-months.
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