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Energies

Bottom in Ethanol?

Posted 11/01/2017 8:19AM CT | RJO Market Insights

The market’s close yesterday above 13-Oct’s 1.418 corrective high and key risk parameter confirms the bullish divergence in momentum discussed in 26-Oct’s Technical Webcast that defines 20-Oct’s 1.385 low as the END of the decline from 18-Sep’s 1.480 high.  Combined with that decline from 1.480 to 1.385 tracing out a textbook 5-wave Elliott pattern AND respecting/rejecting 30-Aug’s 1.384 low AND the decline from 18-Sep’s 1.480 high spanning a length exactly 61.8% of Jul-Aug’s preceding 1.534 – 1.384 decline, a confluence of factors is present that warns of a base/reversal-threat that could be major in scope.

The key by-product of this confirmed bullish divergence in mo is the market’s definition of 20-Oct’s 1.385 low as THE specific low, support and new key risk parameter it is now required to fail below to mitigate a base/reversal environment.  In lieu of such sub-1.385 weakness we anticipate further and potentially extensive gains in the weeks and perhaps even months ahead.

Ethanol Daily Chart

Ethanol Weekly Chart

If that weren’t enough, the weekly (above) and monthly (below) log scale close-only charts show the market’s position at the extreme lower recesses of a nearly-three-YEAR-range where we should be suspicious of exactly this type of bullish divergence in momentum to warn of another intra-range rebound that could be significant in scope.

These issues considered, all previously recommended bearish exposure has been advised to be neutralized on a close above 1.418.  This will eliminate any pain and suffering should the market take off.  Furthermore, setback attempts to the 1.418-to-1.412-range are advised to first be approached as corrective buying opportunities with a failure below 1.385 required to negate this call and reinstate the bear.  In lieu of such sub-1.385 weakness we anticipate further and possibly surprising gains in what could be weeks and months ahead.

Ethanol Monthly Chart

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