A Counter Trend Trade Opportunity
Fundamental News
Lack of demand has been a widely reported story which has acted as a major headwind for prices over the last month. This morning’s weekly export sales report showed net sales of 233,500 MT (9,192,486 bushels) for 2022/2023 were up 55 percent from the previous week and 16 percent from the prior 4-week average. Net sales of 704,700 MT (27,742,805 bushels) for 2023/2024. Both were within expectations (better than below expectations).
With a plethora of bearish headlines thrown at the market for nearly a month straight, from improving crop conditions, to dismal demand, the bearish headlines may be turning stale.
Historical Tendencies
Looking at historical patterns, specifically the 5-year average for this time of year, we’ve seen the market consolidate and attempt to consolidate through the back half of August and into September.
Technicals (December)
December corn futures managed to reclaim some ground yesterday, trading 6 cents higher at the close. As mentioned in yesterday's 2-Minute Drill, we believe that the Bulls need to see consecutive closes back above 480-482 (previous support) to help encourage a bigger relief rally with the next objective being closer to the psychologically and technically significant $5.00 level.
CVOL
CME Group's corn CVOL index is back to the levels we were at in May. We are at the point in the season where we still don’t know what the corn yield is, but we also know what it isn’t. Getting through the pivotal crop development time frame narrows down the range of yield estimates, helping to bring uncertainty and volatility down, which can lower option premiums.
Summary:
The bottom is a process, not necessarily a point. We believe that the process may be under way, at least for a short-term relief rally. With bearish headlines growing tired and seasonal patterns coming into play, we could start to see the market consolidate and try to carve out a near term low. The Bulls have their work cutout for them on the chart, and that starts with consecutive closes above 4.80-482. With Volatility well off the recent highs, options may be a good way to gain long exposure for what would be a counter trend trade.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
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.
Lack of demand has been a widely reported story which has acted as a major headwind for prices over the last month. This morning’s weekly export sales report showed net sales of 233,500 MT (9,192,486 bushels) for 2022/2023 were up 55 percent from the previous week and 16 percent from the prior 4-week average. Net sales of 704,700 MT (27,742,805 bushels) for 2023/2024. Both were within expectations (better than below expectations).
With a plethora of bearish headlines thrown at the market for nearly a month straight, from improving crop conditions, to dismal demand, the bearish headlines may be turning stale.
Historical Tendencies
Looking at historical patterns, specifically the 5-year average for this time of year, we’ve seen the market consolidate and attempt to consolidate through the back half of August and into September.
Technicals (December)
December corn futures managed to reclaim some ground yesterday, trading 6 cents higher at the close. As mentioned in yesterday's 2-Minute Drill, we believe that the Bulls need to see consecutive closes back above 480-482 (previous support) to help encourage a bigger relief rally with the next objective being closer to the psychologically and technically significant $5.00 level.
CVOL
CME Group's corn CVOL index is back to the levels we were at in May. We are at the point in the season where we still don’t know what the corn yield is, but we also know what it isn’t. Getting through the pivotal crop development time frame narrows down the range of yield estimates, helping to bring uncertainty and volatility down, which can lower option premiums.
Summary:
The bottom is a process, not necessarily a point. We believe that the process may be under way, at least for a short-term relief rally. With bearish headlines growing tired and seasonal patterns coming into play, we could start to see the market consolidate and try to carve out a near term low. The Bulls have their work cutout for them on the chart, and that starts with consecutive closes above 4.80-482. With Volatility well off the recent highs, options may be a good way to gain long exposure for what would be a counter trend trade.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
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.