Big Gaps Down in Corn; Chart Benchmarks Now Eyed

Corn futures at the Chicago Board of Trade on Friday opened and closed locked down the daily permissible trading limit of 20 cents a bushel. On Monday morning, corn futures also opened up locked down the daily trading limit. Friday’s and Monday’s price action produced huge and bearish downside price gaps on the daily bar chart. Corn market bears have solid near-term downside technical momentum on their side, as prices have also sees a bearish downside “breakout” from a six-week-old downtrending channel on the daily bar chart for May corn futures.

The next downside near-term technical benchmark is support at $3.50 a bushel in May futures. And below that, technical support is seen at $3.40 a bushel. For new-crop December corn futures, price action Monday filled on the downside a big upside price gap on the daily bar chart, which occurred on Jan. 12. That meant pushing prices below $3.75 a bushel. Below that lies solid chart support at the January low of $3.54 1/2 in December corn. And below that lies solid chart support at the December 2006 low of $3.46 a bushel. For the corn market bulls to begin to regain some fresh upside technical momentum, they would have to push May futures back above $3.85 1/4, which would fill on the upside last Friday’s big downside price gap on the daily bar chart.
click on the chart to enlarge
May 2007 Corn Futures
For December corn, the bulls would need to push prices back above $3.96 a bushel to begin to regain some fresh upside technical momentum. That would fill on the upside Friday’s big downside price gap on the daily bar chart. Important from a technical perspective is the $3.54 price area in May corn and the $3.56 price area in new-crop December corn. These price levels are 50% Fibonacci retracements from the price rallies from the September 2006 lows to the February 2007 highs. When a market that has been in a solid price uptrend does drop below the 50% retracement level of its uptrending move, thatis one solid technical clue that prices will not recover to retest the highs.
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