Tech Guy's Comments 04/18/2022
Thursday's trade further showed the old crop corn contracts are strengthening on the new crop. This inversion (nearby months stronger than deferred months) is what you want to see in a bull market, as it means concerns are creeping in about old crop current supply and demand and less concern about the new crop. Given the new crop is not even planted yet where there is a lot of weather risk, and yet, the old crop, which is already in the bin, is gaining on the new crop; a very unusual and bullish situation. The May/Dec (buy May and sell December spread) traded at a low of plus 40 on Wednesday and gained 15 cents by Thursday’s close to plus 55!
Furthermore, since Apr 7th, corn added 55,000 contracts, increasing its open interest (the number of contracts that have to be offset at a later date) to 1.61 million futures contracts and 2.63 million with options as the May futures price gained about 33 cents. The rule of thumb is that increasing open interest in an up market adds force because most of these new contract positions are funds buying in big. They will defend their positions on small corrections (buying all price dips), fueling the uptrend.
Soybean oil is leading the soy complex. The May contract traded to new all-time high on Thursday, settling at 78.91. Please see the daily chart below with an uptrend line drawn.
The bean oil swing high price projection could be as high as 96.50. This is calculated using the distance from low to high, then this number is added to the correction low of April 1.
May Crude Oil could has completed a 5 wave leg-up. It is possible we will see a correction (pullback) from the $107.64 swing high into the range labeled on the 15 minute chart below.
Notice how the leg fell below the uptrend line between the 3 and 4 points only to traverse back up between points 4 and 5. Technical analysis is more of an art with complex math (that we can only approximate) than it is a science.
The up leg took 5 days. The backfill could last a few hours to a day and a half. It could be shallow (above the 38% retracement labeled on chart), or hardly at all... or deeper towards the 50% mark. The depth of backfill will be determined by how much buying demand the big funds have. After this correction or sideways the upside target is still the $117 area.