Corn May Extend Rally After Resistance Break: Technical Analysis

A two-month rally in corn futures probably will extend into June as prices break resistance from the March highs this week, according to Northstar Commodity Investment Co.

Corn futures for December delivery on the Chicago Board of Trade jumped more than 9 percent from an 11-month low on May 17. On May 31, the price closed at $5.6725 a bushel, the highest since March 27, and the relative-strength index gained last week. A settlement this week above the March intraday high of $5.7375 signals the grain will approach the January high of $6.05, according to Mark Schultz, the chief analyst at Northstar.

“Corn should make a quick jump to test the January highs if futures close above the March peak,” Schultz said. “We should see fund money flow back into the corn market.”

Hedge funds and other large speculators increased bets on higher corn prices by 80 percent to 98,370 futures and options contracts in the week ended May 28, data from the Commodity Futures Trading Commission on May 31 showed. Net longs still dropped 49 percent from the end of March.

Corn may rally as wet, cool weather in the Midwest prompts farmers to shift acreage to soybeans, Schultz said. Growers also may opt to collect crop insurance and leave fields empty, he said. The U.S. Department of Agriculture is scheduled to update planted acreage on June 28.

“The corn market is moving into a bull phase that may last through June until more is known about planted area, and the health of the crop already planted,” Schultz said. “There’s a chance this rally could carry all the way up to $6.40.”

In technical analysis, investors and analysts study charts of trading patterns and prices to forecast changes in a bond, commodity, currency or index.

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