Technical Analysis #C-CORN : 2016-07-14
IFC Markets | Jul 14, 2016 08:52AM ET
USDA cuts world corn production and stocks outlook in US
In its monthly WASDE report for July USDA cut outlook for US corn stocks of previous crop at the end of 2015/16 to 1.701bn bushels. This is 7mln bushels less than in June report. The official estimate was below the range of 1.708-1.907 given by independent analytical agricultural agencies. The forecast of corn stocks of new crop also fell short of expectations. Will the corn prices advance?
USDA believes the world corn production in 2015/16 agricultural season is to be 959.79mln tonnes which is below the 2014/15 reading of 1013.56mln tonnes. This may lead to 15.7% decline in its global export. The main reason of lower production is drought in Brazil. USDA expects the Brazilian corn crops to fall 21.4% this season compared to 2014/15 season. The US meteorologists now forecast the drought in US in second half of July and in first half of August. This may have a negative effect on corn crops in US. US is second to none in global corn production followed by China and Brazil. The main corn importers are Japan, Mexico and South Korea.
On the daily chart Corn: D1 is correcting up from its 20-month low since October 2014. The Parabolic indicator gives signal to buy which may be used as support level. The MACD has not reversed and continues giving bearish signals. The Bollinger bands have widened a lot which means extremely high volatility. The RSI has left the oversold zone and is below 50, no divergence. The bullish momentum may develop in case corn price surpasses the Wednesday high of 369. This level may serve the point of entry. The initial stop-loss may be placed below the Parabolic signal, the last fractal low and 20-month low at 339. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 339 without reaching the order at 369, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
PositionBuyBuy stopabove 369Stop lossbelow 339
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