After the price action recovered during the first half of 2009 from a terrible second half of 2008, it plunged back in late June this year. Now the price is trading around 330 cents and is likely to fall even lower, probably to the level of $305. Remember, between early December and the first fortnight of June, corn prices had jumped back by 48%. They reached a high price of 450 US cents on June 10.
During this 6-month bullish period, the price action was backed by an ascending oblique support line. This support line goes through the low of last December (point A on the chart) and through the higher lows posted in February, March, April and June (points B, C, D and E).
However the price action eventually broke below this support line. It triggered a strong bearish signal and a sharp correction until mid-July. After a quick bounce in late July to 376 cents, prices fell back to the current levels.
As mentioned above, it is probable that the objective now is the low point of last December (point A) at 305 cents. It could create an opportunity for a double-bottom pattern and therefore a rebound opportunity. The indicators are all oriented downward and argue for a further plunge. The 20-day Commodity Channel Index and the Stochastic Momentum Index have triggered bearish signals in early August and remain negative.
The Bollinger Bands are useful for price projection. The lower band here corresponds to the level of 305 cents. This level is only 7.5% lower than the current level. Typically a rebound may occur only when the price action hits this lower band. There are several possibilities.
When the price closes below than the lower band then closes above it on the following day, then it means that the trend is reverses. Or when the price hits and sticks inside the band several days in a row, it also means that you’re in the last part of the bearish trend. These are the signals an investor should wait before going “long” above the level of 300 cents.
