The information and opinions expressed below are based on my analysis of price behavior and chart activity
December Corn
December Corn started off this week closing down a penny from Friday’s close at 4.30. Last’s week’s finish was fairly strong, with the Dec managing to gain 16 ½ cents on the week, and posting it’s best weekly close since the week that begain June 24th. Today’s activity seemed a bit neutral, to me, as the market opened and closed at the same price. There was a push to 4.26 ½, below Friday’s low, but the market rallied, mildly, for the last 3 hours of today’s session to put the close firmly back to where we started for the day. Typical USDA reports this week will be delayed by a day, due to Veteran’s Day, so Export Inspections and Crop Progress will come out Tuesday, with the Export Sales data being released on Friday. Without any “flash sales” hitting trader’s inboxes this morning, it almost seems as if the trade is waiting for new news. Last week’s monthly WASDE report showed a slight reduction in expected yields, to 183.1 bu/acre, down from the previous month at 183.8. Overall, production is still expected to come in north of a 15.1 billion bushel crop, with mild adjustments expected in December before the “final” numbers in the January report. It wasn’t an earth-shattering November USDA report, by any stretch, but it also wasn’t a bearish surprise that sent prices spiralling lower. Uncertainty as to the incoming US administration and their approach to tarriffs has everyone talking and wondering, but nothing definite is known, at this time. As a result of that uncertainty, we may see an uptick in export sales and inspections, as world wide grain traders attepmt to get product moving before inauguaration day. To my eye, I see overhead resistance at Friday’s high of 4.34 ¾ and then at the 200-day moving average near 4.41 ¾ (purple). Above that lies the big, fat round number of $4.50, and I’m of the opinion that markets tend to gravitate toward big, fat, round (and often even) numbers. I also see support levels near the 5- and 10-day moving averages of 4.26 ¾ and 4.20, respectively. In betweeen those two is the October 24th high of 4.24. Last week’s trade also saw the 50- and 100-day moving averasge cross over into “bullish” territory (green and grey) and I think their currrent levels of 4.15 and 4.12 also may offer some support. We have seen 5 consecutive days of closes above the decscending blue trendline, which further indicates to me that the trend my be shifting back to an uptrending pattern. Stochastics in the lower subgraph are at relatively high and overbought levels, but just because that might show that we’re speeding, doesn’t mean that we have to throw on the brakes and completely reverse trend. Producers that have sold Corn “off the combine” so to speak, may do well to cosider re-owning that Corn by using Call options or Call Option Spreads into next year. March options give 120 days until expiration and a 4.50 March Call closed today at 13 1/8, or $656.25 per option, plus commissions and fees. In my opinion, that’s not a bad price to pay for 120+ days of opportunity. A 4.40/4.90 March Call Spread settled at 13 ¾ cents, also plus commissions and fees, leaving about 36 ¼ cents in potential upside, as opposed to the “unlimited” upside of the 4.40 calls. My suggestion would be to place GTC orders at 2x what you paid for them, and then re-evaluate the market and your outlook if those orders get hit. I’m not getting wildly bullish on Corn, yet. I think it would take some heavy lifting and some outside influences (exports, currencies, etc.) to get Corn up to $5.00, but the $4.50 to $4.60 range looks like a reasonable upside target from here. I think that the downside risk, barring some outside news, might be in the $4.10 to $4.00 levels. If you’re worried about protecting further downside risk, call me directly to discuss your current situation and marketing goals.
Jefferson Fosse Walsh Trading
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