Finally, Time To Buy Corn?

2016-09-16 | David Starr

Corn has been in a brutal downtrend and with December futures trading around $3.30 a bushel it’s hard for a farmer to turn a profit. So is it time to think that the price has to go up?

I have developed several tools over the years which fit in my process for finding trades and they are arguing to buy. My process goes like this:

1. Find a level to trade against; and

2. Look for a signal to trade against that level.

Finding support and resistance starts with Voodoo Lines. These are my long term support and resistance lines which are the most important indicator on my charts. They are levels which stay the same for years are can be used to assess the trend and to trade against. Then I add in DynaRange. This indicator analyzes market moves and anticipates levels where the move might end. When DynaRange and Voodoo Lines have levels which coincide they are particularly powerful.

Corn Futures

Take a look at the chart of Corn and see how in June the grain ran right up into a red line and a series of red dots. The line is the Voodoo Fireline, the most important Voodoo Line level there is, and the red dots are DynaRange resistance. The levels are not right on top of each other, but they’re close enough for me to pay attention. All I need is a signal to get in and it comes in the form of a Ready, Aim, Fire! sell signal. This is the magenta seen on the bottom portion of the chart. I only care about the arrows which occur outside the blue horizontal lines as they’re the most powerful. In this case, it generated the signal as Corn started to turn.

Now we’re starting to see some buy signals. Corn has just started to bounce from the Voodoo snowline (white line) and DynaRange support (green dots). Again these levels coincide to highlight this as a level of interest. Last week we got our Magenta buy arrow from outside of the blue lines and I’m getting interested.

As much as I like these indicators, there are a few more things I need to see. I put on my Elliott Wave hat and drill down to an hourly chart. I see that the move up looks like it could have five waves within it. If so, it is a sign that the trend is now up. If the immediate pullback is a three-wave move, it would be counter-trend and also indicate that the trend is up. So if I get a move back down below the level of circle-a, and then a turn back up above circle-b without going below the August low first, then Corn will look good to the upside.

CZ16 1 hour

Waiting for these wave patterns will increase my confidence in what my indicators are telling me. And while no system works all the time, I prefer to focus on opportunities where all the pieces come together.