May Corn Rally Intact Above Minimum $3.69

February 21, 2018 10:55AM CST

Only a glance at the hourly chart below of the now-prompt May contract below is needed to see that upside momentum has been waning for the past two weeks. The market's failure yesterday to sustain gains above prior 3.76-area resistance-turned-support and likely failure below 15-Feb's micro corrective low at 3.73 warns that yesterday's 3.78 high may be developing as one of importance. But given the magnitude and impulsiveness of the past SIX WEEKS' rally, such a micro momentum failure would be of an insufficient scale to conclude anything but another interim corrective hiccup similar to 05-Feb's "failure" below 3.66 that was nullified a day later with a resumed uptrend above 3.71.

Per such, traders are advised to consider 09-Feb's next larger-degree corrective low at 3.69 as our short-term risk parameter this market is required to fail below to confirm a bearish divergence in momentum of a scale sufficient to break the 6-week uptrend and expose a relatively larger-degree correction lower. In lieu of such sub-3.69 weakness setback attempts are still advised to first be approached as corrective buying opportunities.
The daily log scale chart below shows the 6-week, 7% rally that has broken Jul'17 - Jan'18's major downtrend and exposed a major correction or reversal higher. A failure below at least 09-Feb's 3.69 corrective low is required to confirm the bearish divergence in momentum sufficient to break the uptrend from 12-Jan's 3.54 low.

Such a mo failure would mean the end of what we believe is just the INITIAL (A- or 1st-Wave) rally from 12-Jan's 3.54 low and key long-term risk parameter. A (B- or 2nd-Wave) corrective rebuttal to this initial rally is not only not unexpected, it could present an outstanding and acute risk/reward buying opportunity from, say, the 3.65-to-3.62-range for long-term players ahead of what we believe will be extensive gains from roughly Apr on this year. In lieu of such sub-3.69 weakness the trend is up and should not surprise by its continuance or acceleration.

Traders are once again reminded of the factors that have warned of a major base/reversal environment for months:

  • confirmed bullish divergence in weekly momentum from
  • the lower-quarter of the 3-year lateral range amidst
  • historically bearish sentiment levels.

These technical facts are identical to every other major base/reversal environment dating back to Aug 2000 and warn of prices that could go 0.75-to-1.00 higher before trading 0.30-cents lower.

These issues considered, a bullish policy and exposure remain advised with a failure below 3.69 in the now-prompt May contract required for shorter-term traders to move to the sidelines and for longer-term players to pare bullish exposure to more conservative levels to circumvent or reduce the risk of what we'd then suspect is an interim correction and ultimate buying opportunity. In lieu of such sub-3.69 weakness further and possibly accelerated gains remain expected.


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