Given that commodities have been beaten down for quite some time, it may be time to look towards them for a shot on the long side. Corn has been an interesting chart to observe and one that I admittedly neglect sometimes because it does not move as fast as a lot of other asset classes. I had mentioned a few weeks ago, as had many other chartists, that Corn looked to be finding some footing at support and wants to go higher. So today, I will outline why I think the Risk/Reward is to the upside if you have the patience to wait it out and let Corn do its thing.
First off, lets look at the weekly chart.
As you can see Corn futures are sitting within an area of support and have been rounding out a base, or turning from bearish to bullish, as well as moving higher in terms of momentum. Momentum had been signaling a positive divergence since mid 2013 and is making its way higher in an attempt to break into bullish territory above 50. In terms of price, this rounding base should really get moving with a break and close above the 450-455 area which as you can see by the chart has acted as support/resistance in the past. Price is also back above the 21 week SMA which will provide support as it flattens and moves higher.
Similar action shown on the daily chart except you can see the basing and flattening of the moving averages more clearly. We are at the top of this support area which will be a big level to break above on our way towards the 200 day EMA at 490.
Now on a relative basis you can see corn vs the CRB index below. As you can see we broke above the December high in the ratio last month and are looking to form a higher low and base for a move higher. We have also broken the aggressive downtrend line established in 2013. Again, corn not a very fast mover, but making progress on an absolute and relative basis.
Similar action relative to the S&P 500. We have been in a downtrend since late 2012 and are now looking to form somewhat of a base and break above channel resistance.
So, in conclusion. Corn, although not the most exciting asset class to trade, continues to exhibit strong signs of a bearish to bullish reversal at support and will confirm a breakout above 455. The longer term target for corn is a test of the 200 day EMA at 490 and the prior trend line that it broke down from at ~525. Support remains the rising moving averages below and the bottom of this demand area just above $400. If you have the patience corn can be a great investment/trade or you can try to play this move through something else that correlates with moves in corn, etc… May post something on that soon if I can find something relevant.