Focus: Rice Makes a 6-Week High
Last Thursday, May rice opened limit-up and closed the day at $13.39 ½ (up $0.64). The move was a breakout above trendline resistance, as well as a new six-week high. The sharp rise in price was driven by a U.S. Department of Agriculture report which cut the 2008-2009 projected rice stocks by 27%. Apparently, the USDA had previously overestimated the size of the 2008 crop. Before the breakout, rice had been moving in a sideways pattern consistent with low trend strength (low ADX). The ADX had fallen from 48 in February to 14 in March. This led to an ADXcellence “cross and hold” buy signal. Notice how the +DMI crossed above 25 (strength) when price broke out above resistance; this represents momentum convergence, or confirmation.
Chart Courtesy of TradeStation.
Dr. Charles B. Schaap transitioned from health care to wealth care in the nineties. He is the author of ADXcellence —Power Trend Strategies and Invest with Success—Big Profits for Small Investors. Dr. Schaap is a commodity futures strategist and recognized authority in technical analysis of the financial markets. His website is www.adxcellence.com.
