Corn futures (symbol: C) continue trading aggressively lower after breaking the long-running uptrend line dating back to Dec05, which originates at the $1.8575/bushel level. Quoting from our 01Jul14 post, “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.” (can be seen here: http://wp.me/p3SbOG-eq)
The following chart reflects corn futures price dating back 10 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. As expected, corn spent very little time in the $4.00-5.50/bushel range, resuming the path to lower prices.
The following evidence suggests the trend lower is winding down:
volatility has moderated back to 2008 levels
the RSI is projecting a strong buy signal
volume is retracting despite the aggressive price movement lower
With that said, we do not recommend a ‘catch the falling knife’ trade strategy.
A potentially huge buying opportunity is on the horizon for corn, however, we believe it is from lower levels. Substantial support lies between the $3.25 and 2.90 level. Expect shorts to cover in this range. Buyers should be opportunistic at the lower end of the support range.
Murphy & Co’s Corn model is currently short. To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/.