FUTURES FOCUS: Grain Critical Season
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July 20, 2007
Around this time of year, after the Fourth of July holiday in the US, the critical growing season for corn and soybeans comes into play. These markets can become extremely volatile and can change trend just as quickly as the weather.
This period of mid- to late-July is typically the hottest period in the corn and soybean growing regions in the US. With this in mind one can imagine that the weather can dictate how deep each retracement can be in a grains bull market rally.
Chart 1 below shows the price action on the Soybean Daily Bar Chart (NS-SpotV) bull market since September 2006. I’ve used the chart showing data for both the day and night sessions so that movements in the night market are visible. Normally there is not much volatility in the night market but around this critical corn and soybean period it can make large moves. These larger moves can serve as an advantage for earlier entries or exits prior to the commencement of the day session.
Observe the increasing range of some of the daily bars on the chart as we move into the end of June and early July and the deeper retracements in shorter periods of time.
Chart 1 – NS-SpotV Daily Bar Chart
Looking at the most recent Corn prices in the Corn Daily Bar Chart (NC-SpotV) – Chart 2 below – we see that although this market also started a bull rally in September 2006 it has met with more choppy market action than the Soybean market.
From previous articles we know this rally has also been due to the production of ethanol, which is sparking a higher demand for corn. In the search for larger profits the high market price of corn has encouraged corn growers to plant more corn this season therefore sacrificing some of the land normally used to plant Soybeans and Cotton.
Chart 2 – NC-SpotV Daily Bar Chart
Needless to say, this volatility in the grain markets has proved to be a profitable trading arena for futures traders who know how to trade with a plan and are disciplined with their use of stops.
Is there more upside in these markets or are they ready to roll over?
The daily swing charts have these markets still in an up trend and until the charts tell me otherwise I am more than happy to enter into long positions on the pullbacks.
Trade Smart
Mario La Marra
Trading Tutors
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