Corn futures (symbol: C) are oversold as evidenced by:
- stochastic indicators are well oversold and suggesting price reversal
- the rsi initiated repeated buy signals during Nov13
- fairly strong volume on increasing prices since mid Jan14, and
- volatility is nearing support levels from Jun10.
The following chart reflects corn futures price dating back 20 years.
The move down from $8.4375/bushel on 10Aug12 has been aggressive and unrelenting. Perhaps most notable on the chart is the Jul13 gap down from $6.84 to $5.4975. Murphy & Co. expects corn to spend very little time in the $4.00-5.50/bushel range and eventually resume the path to lower prices for the following reasons:
- the $4.00-5.50/bushel price range has historically proven to be a ‘transitional area’ for corn
- corn technically violated the long running up trend line which originates from the Dec05 low, and
- while volatility may find some support at this level, we expect volatility should retrace back to the levels seen in 2000-06.
A potentially huge buying opportunity is on the horizon for corn, however, we believe it is from lower levels. Substantial support lies at the $2.90 level.
Murphy & Co’s Corn model is currently short. To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/.