Bearish Key Reversal Down in May Corn

corn-may2011.gifMay corn futures at the Chicago Board of Trade in overnight trading hours Tuesday scored a fresh contract and 2.5-year high of $7.44 1/4 a bushel. Prices then abruptly reversed course and in midday trading were locked down the 30-cent daily permissible trading limit. Tuesday’s price action has produced a big and technically bearish “key reversal” down on the daily bar chart. A key reversal down occurs when a futures market scores a fresh contract high and then on the same day reverses course to close lower, nearer the session low and has a trading range that has a higher high and lower low than the previous session’s trading range. A key reversal down on the daily chart is an early technical clue that a market top is in place.
Good follow-through selling pressure in May corn futures on Wednesday would produce more near-term technical damage and would likely at least temporarily negate an eight-month-old uptrend in place on the daily bar chart. The corn market bears have quickly gained fresh downside near-term technical momentum. Their next downside price objective is to produce a close in May futures prices below strong chart support at $6.50 a bushel. For the corn market bulls to regain some fresh upside near-term technical momentum they would have to produce a close in May futures prices back above solid chart resistance at last week’s high of $7.25 1/2. Stay tuned!–Jim Wyckoff

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