Last week, we were looking for a potential bottom in corn. Since then, we’ve mostly traded sideways to slightly higher. However, the end of this week brings a “triple-witching” event - the end of the month, the end of the fiscal quarter, and the quarterly grain stocks report all occur on Friday. In last quarter’s grain stocks report, the market sold off fairly sharply as corn stocks were reportedly 54% higher on a year-over-year basis.
The contract’s resilience in defending the lows is very encouraging considering the positioning of managed funds. In the chart below, you can see that managed funds have amassed a substantial short position over the course of the last 6 weeks. As of last Friday’s CFTC Commitments of Traders report, managed funds held 319,079 short positions. Meanwhile, prices have maintained a very tight 15-20 cent trading range.
As such, there is significant fund rebalancing in Friday’s session, it may induce a short-covering rally. What does that mean? In order to exit a short position, the contract holder will have to buy a contract. If there is substantial buying volume, it will press prices higher, and force short-positions to exit ultimately resulting in a rally.
The question then becomes - how high can we go? Considering that the December corn contract was unable to close above 500 a single time in the month of August or September thus far, that may be an ambitious initial target. In order to retest 500, and ultimately our 502-506 ½ 3-star resistance pocket, we will have to surpass 3-star resistance between 489 and 491. If we manage to trade through 491, it could lay the foundation for December corn to surpass 500 once again.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
The contract’s resilience in defending the lows is very encouraging considering the positioning of managed funds. In the chart below, you can see that managed funds have amassed a substantial short position over the course of the last 6 weeks. As of last Friday’s CFTC Commitments of Traders report, managed funds held 319,079 short positions. Meanwhile, prices have maintained a very tight 15-20 cent trading range.
As such, there is significant fund rebalancing in Friday’s session, it may induce a short-covering rally. What does that mean? In order to exit a short position, the contract holder will have to buy a contract. If there is substantial buying volume, it will press prices higher, and force short-positions to exit ultimately resulting in a rally.
The question then becomes - how high can we go? Considering that the December corn contract was unable to close above 500 a single time in the month of August or September thus far, that may be an ambitious initial target. In order to retest 500, and ultimately our 502-506 ½ 3-star resistance pocket, we will have to surpass 3-star resistance between 489 and 491. If we manage to trade through 491, it could lay the foundation for December corn to surpass 500 once again.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.