A Violent Tale of Three Trends of Commodities Corn Oats and Wheat

Jan 10, 2014: 3:07 PM CST

One of the main principles of Technical Analysis is tha t”trends, once established, have greater odds of continuing than of reversing.”

Recent price activity in Corn, Oat, and Wheat provide evidence of this concept, and even if you don’t trade these markets, it’s a good idea to take a look at the recent “violent” price action in the context of ongoing major trends in these commodity markets.

Let’s start with a brief overview of their Daily Charts before putting today’s volatile action in context:

Downtrending WHEAT (@W):

Wheat @W Wheat Futures Technical Analysis Trend

Downtrending CORN (@C):

Corn @C Commodity Charting Technical Analysis Trends Daily Chart

Uptrending OATS (@O):

Oats @O Oat Futures Oats Futures Daily Chart Uptrend Breakout Bull Market Technical Analysis lesson

The main idea from these three charts is to study the prevailing trend structure (compare highs and lows) and note the recent price action.

Particularly in commodity markets, trends tend to be salient (lasting) events which give traders opportunities to join the trends on pullbacks (retracements) or breakouts (as was the case in Oats recently).

We compare price with a momentum oscillator along with volume (paying close attention to strength or divergences with price and the indicators).  Pay close attention to the mini-divergence and reversal examples I highlighted in Oats (@O).

With the trend structure established, let’s now turn our attention to today’s ‘violent’ or volatile one-day moves that draw our attention.

Wheat continued the trend (failed reversal) with a power-sell day; Corn fought the trend with a big upside session; and Oats took a well-deserved pause after a stellar three-day impulse from a breakout.

Here’s the closer-view of the short-term structure as seen from the 30-min comparison charts (click “Continue Reading” to view the intraday charts):

Downtrending WHEAT (@W):

Wheat @W Wheat Futures Technical Analysis Trend

Downtrending CORN (@C):

Corn @C Commodity Charting Technical Analysis Trends Daily Chart

Uptrending OATS (@O):

Oats @O Oat Futures Oats Futures Daily Chart Uptrend Breakout Bull Market Technical Analysis lesson

Taken together, we can see how the intraday power-buy (or sell) impulses fall within the broader picture of the three Daily Chart trends.

For Wheat (@W), price continued to fall or “collapse” after a failed bullish intraday reversal.

The big surprise – and powerful impulse up via a short-squeeze – took place in Corn (@C) after a trendline breakdown into “Bear Trap” scenario unfolded.

Price rocketed from the lower trendline all the way to a new breakout above a falling trendline structure.  Continue watching Corn relative to these intraday trendline barriers.

Finally, Oats (@O) reversed lower down away from 392 on a dual negative divergence development (momentum and volume).

I highlighted the sideways consolidation range along with the recent Bear Trap which was slightly smaller in scope than Corn’s recent trap.

While there are plenty of educational examples on these three charts, continue to focus on trend structure (with momentum and volume) and ‘traps’ along with how the intraday (lower frame) relates to the broader (daily chart) trend structure in motion.

Afraid to Trade Premium Content and Membership

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning parameters as we watch a “hold and bounce” or “break and retrace” scenario play out in the near future.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter:  http://twitter.com/afraidtotrade

Corey’s new book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

  • Digg
  • del.icio.us
  • Facebook
  • E-mail this story to a friend!
  • StumbleUpon
  • Technorati
  • TwitThis
Comments
blog comments powered by Disqus