In last week’s article which was published on Thursday the day before the USDA Report I advised the following: Tomorrow’s USDA numbers could be the catalyst to break this market lower or could cause this market to take off like a rocket. As I see it most of the negative news has been “baked in” to the current prices so in order to break it lower we will need to see some rather bearish numbers otherwise look out, we could see a nice pop. After the report came out on Friday, we saw the bulls “shake the tree” and knock the weak longs out of the market and attract some fresh short sellers only to then climb from Friday’s low of $4.97 ½ to yesterday’s high of $5.37 ½, a nice 40 cent move higher over 5 trading sessions! The report basically ended up inside the range of guestimates and with prices already depressed heading into the report coupled with strong support around the May monthly low and 200 moving average one could see why the market performed the way it. Currently, prices are trading around $5.25 which appears to be some profit taking ahead of the weekend, if the market consolidates around this area I would expect to see the market head to around the $5.42ish range before running into resistance again. Watch for short term support around $5.18 area.
Slight revision on major support areas: Watch December corn at $4.96 on the downside vs $4.99 and $6.39 ½ on the upside – basically a breakout on the May monthly chart, those numbers are based off December corn month of May high and Friday’s low. There are several, what I consider, minor areas of support and resistance inside that range that can help with short term market direction if violated. Call me at 1-800-367-7290 for more in-depth discussion on these numbers.
I would suggest using an option strategy to manage your futures position risk or an outright option strategy. Implied option volatility recently came down but is still relatively high compared to historical vol levels. You may want to incorporate some short options into your strategy in a calculated risk manner such as bull or bear option spreads. I have 25 years of grain market experience, please feel free to call me at 1-800-367-7290 for more details or to discuss in depth trading strategies. Also be sure to check out my past weekly grain market updates posted on our website.