There have been 10 major bull moves in corn futures since 1977. A lot of money has been and can be made in the bull market we are currently in. Using Elliot Wave and Swing Theory technical tools, measurements as high as $5.00 to $5.50 per bushel can be calculated before this move is done. A move of that magnitude from current levels could make millions. However, when does a trader know that the bull market is through? Only one time (1983-84) of the 10 major moves above $3.00 could the technical trader identify a good formation signal to sell. Thus in grains, bulls get more bullish, chartists recalculate higher objectives. And when the top comes, it’s in and the market goes down so fast it can become a home wrecker.
“The 20% rule,” depicts a 20% Failure and Top rule. Basically, once a 20% value loss in corn is experienced, the top is in. Regardless of how you feel — get out. If you’re a die hard bull, you can re-establish your bullish position if there is more than a 10% value recovery. Only one year (1997) was there a signal to get back into the long position; it didn’t work. Usually, once there is a 20% value loss, it is over. See “The 20% rule,” below.
At the time of this writing, moving averages have turned down. A close below $3.48 on a weekly front- month chart would kick in the 20% failure top rule. But if this holds, then a rally above $3.96 would re-instate all bullish enthusiasm. A daily December corn chart (see “Decision time,” below) shows where support is and where the buy zone is to take advantage of if the market does decline. This would allow a trader to buy with little risk if you were to limit losses using the 20% Failure Top rule.
Bill Biedermann is senior vice president of Allendale Inc: www.allendale-inc.com. He can be reached at bbiedermann@allendale-inc.com. Allendale agricultural market analysis can also be found on www.futuresmag.com.
