Are December Corn Futures Set for a Rally to $5.00?December corn futures, often referred to as the “new crop” contract because it is the price for the U.S. crop that is about to get planted. The first crop progress report of the year showed just 2% of the crop is planted in the United States. With the crop hardly in the ground, there are uncertainties around production potential that tend to offer seasonal support to prices.
The seasonal backdrop coupled with a potential shift in momentum through the month of March may offer a good risk/reward trade to the upside. As you can see on the chart 480-485 has been a significant pocket dating back to last May, where it first acted as support. It eventually was the breakdown point on January 12th and has acted as resistance since then. If the market can chew through and achieve consecutive closes above this pocket, we believe it could spark additional upside momentum with the next significant resistance pocket coming in near $5.00 -5.06, which is both technically and psychologically significant. As you can see on the chart this was a congestion zone through the back half of last year and represents the 50% retracement (middle of the range) from last summer’s high to the year’s low. There’s also a small gap at 503 from January 2nd.
Looking at the weekly Commitment of Traders report we see funds holding a net shot position of 259,556 futures/options contracts, this would historically be looked at as a large net short position, especially for this time of year. Closes above technical resistance could spark short covering and add an additional tailwind to the market. A break and close below the recent lows of 460 ¾ would neutralize this bullish bias.
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*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.
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