Option play: Can the corn ever stop?

June 9, 2014 10:46 AM

The corn market has continued its free fall into the abyss, making one new low after another. From the looks of things it's hard for me to find a bottom on the daily chart. So, I then move onto the weekly chart and it appears as though we could retest the previous low of $4.06/bushel set back during the week of January 6.

As the majority of the grain is in the ground it would seem to me to be a weather market, and we all know that Mother Nature can be vicious and beautifully amazing all in the same week. Things to look out for would be in my opinion, drought, floods, infestation and disease.

Below I have the current technical opinion from Barchart, which I got from a web application that we have developed for our clients called MARKETHEAD. This is where I get about 85% of all my research from. That means I get both technical and fundamental research from this web app. Also, I am a veteran series 3 Broker of 15 years. So, if I'm using it, then maybe my readers should check it out. Yes?

I have many questions as we head into the growing season for corn. Will we see drought, flooding, infestation, disease or perfect growing weather? If any one of these potential characteristics of mamma nature occur, it could be a potential market mover for the corn, so I will be paying attention.

From a technical stand point the daily July corn chart would also indicate to me that the market is in what I refer to as a "SUPER TREND" down. Why? Well here are the characteristics of what I have coined a "SUPER-TREND" down. They include the 9- (red line) and 20-day (green line) Simple Moving Averages (SMA). As the 9-day SMA crosses down and under the 20-day SMA and both indicators point lower on sharp angles and the market trades below the 9-day SMA (red line) as it acts as resistance, then I see a "SUPER TREND" down. That is certainly what I see here.





I believe this could be an opportunity, of course not without commensurate risk, to sell deep-out-of-the-money call options and collect premium. This is due to the current downward action or maybe the potential for future consolidation.

About the Author

Matt McKinney is a full-service options broker at Zaner Group both buying and selling energies, metals, grains, softs, currencies and the 30-year bond market. My strategies include time frames of 45-120 days with the ability to liquidate at any time. I can be reached at mmckinney@zaner.com.

Whether you're a novice trader who wants to participate in options on futures or an experienced trader, you can also check out my blog at http://www.mmckinneyfutures.com/.