Following the disappointment of the failed talks between the United States and China about two weeks ago, grains, particularly corn and soybeans, have fallen. The corn price dropped to a new low of the year (Monday, May 13). Since that time, the corn has started a steep rise due to the known meteorological problems.
If we take the chart of the futures contract delivery July, we can see how strong has been the rise over the last seven days, and that has led the price to break the trendline resistance of the bearish channel, within which corn was moving from July 2018.
When these situations happen, when an external factor (in this case the climate, the heavy rains) influences so strongly the price of a commodity, the best thing to do is to wait for the effect ends, and for the price to start a "return" towards a normal value.
Yes, because if we exclude the weather, the situation for corn (and all other grains) is not improved, on the contrary...
This rally of the price is a real breath of fresh air for American corn farmers. The collapse of the price has brought to their knees many of them. The trade disputes have already caused a $6.3 billion loss to corn farmers in 2018, and 2019 could be even worse.
It does not mean the rally has to stop right here. The forecast promises more rain the next ten days, and that will give new fuel to the strong bullish phase, but do keep in mind that the rallies, particularly short-covering rallies, can end just as abruptly as they began.
So, I repeat, we have to be patient, wait for the climate effect ends, and only then will we be able to open bearish positions, taking advantage of a return of the price to a value more consistent with the moment we are living.
A fundamental rule in trading is to never anticipate market entry. Remember that it is always better to take a small part of a big movement, rather than a large part of a little movement.
So never be impatient to click on buy or sell.
If we take the chart of the futures contract delivery July, we can see how strong has been the rise over the last seven days, and that has led the price to break the trendline resistance of the bearish channel, within which corn was moving from July 2018.
When these situations happen, when an external factor (in this case the climate, the heavy rains) influences so strongly the price of a commodity, the best thing to do is to wait for the effect ends, and for the price to start a "return" towards a normal value.
Yes, because if we exclude the weather, the situation for corn (and all other grains) is not improved, on the contrary...
This rally of the price is a real breath of fresh air for American corn farmers. The collapse of the price has brought to their knees many of them. The trade disputes have already caused a $6.3 billion loss to corn farmers in 2018, and 2019 could be even worse.
It does not mean the rally has to stop right here. The forecast promises more rain the next ten days, and that will give new fuel to the strong bullish phase, but do keep in mind that the rallies, particularly short-covering rallies, can end just as abruptly as they began.
So, I repeat, we have to be patient, wait for the climate effect ends, and only then will we be able to open bearish positions, taking advantage of a return of the price to a value more consistent with the moment we are living.
A fundamental rule in trading is to never anticipate market entry. Remember that it is always better to take a small part of a big movement, rather than a large part of a little movement.
So never be impatient to click on buy or sell.