WEEK 9 (Part 2): The Road Ahead (Technical Analysis)

Wheat

Even though the drop was not as drastic as soybean’s, wheat future prices also dropped after the release of the USDA crop report on Friday (Nov. 9^th).

If I identified it correctly, the candle stick diagram shows a hammer, which indicates a potential trend reversal that is present at the end of the chart. December 2012 wheat price is likely to spike early next week. However, from the area graph, I spotted an oblivious head and shoulder pattern, which is currently unfinished. It appears to be in the middle of forming the second shoulder, and if this is true, wheat future prices is unlikely to rebound pass the “head” spike, which means that wheat future prices spike is not going to go above $900.00 / bushel next week.

December 2012 Wheat Contract (Candle Stick)

December 2012 Wheat Contract (Area)

Corn

Corn future prices have stayed relatively stable compared to other commodity future prices, but prices did drop slightly at the release of the USDA crop report. I found recent corn future prices rather hard to predict, because there have been a lot of small price fluctuations occurring. From the candle stick chart, I believe that there are blending candles forming at the end Friday (Nov.9^th), since the last one (red) is much longer than the previous green candle. I predict that the next candle is going to be a hammer, and future prices are going to continue decreasing slightly, and rebound.

December 2012 Corn Contract (1 week Period)

Looking at the 2 months period analytical chart for corn, I spot the formation of a descending triangle, which is a signal for selling. The descending triangle means there has been a downtrend prior to the triangle, and future prices are anticipated to drop. Therefore, I anticipate corn prices to decrease within the next couple of months. Since the candle chart used is for December 2012 corn contract, which is going to deliver before 2013, corn price can be expected to drop further before the expiry day.

December 2012 Corn Contract (2 Month Period)

Soybean

Soybean future prices plunged on Friday (Nov.9^th) due to the release of the USDA crop report; future prices dropped by over 40 cents within just a few hours. The contract that expires in November 2012 fell 47.25%, the lowest since June 22, 2012. By observing the trading charts for November 2012, and January 2013 contracts, if I spotted them correctly, I see hammer at the end of the graphs for both contracts. Hammers are reversal patterns that usually form after a decline. Hammers also mark support, or “limit down” levels. Since there are hammers for both November 2012 contract, and January 2012 contract, I predict there to be a price rebound for soybean at the beginning of next week, right after the market opens. Thus, I’m going to keep all 5 LONG soybean contracts in the market, until soybean future prices spikes, to minimize my loss from Friday (Nov.9^th)’s sharp drop in soybean prices.

November 2012 Soybean Contract

January 2013 Soybean Contract

Looking slightly further into the future, assuming I identified the head and shoulders patterns properly, I foresee a decrease in soybean prices for the next couple of months. As indicated in the charts below (see labels), there appears to be a head and shoulders pattern in both November 2012, and January 2013 soybean contracts. Also, neither of these head and shoulder patterns are inversed, indicating that the prices should decline for the next few months.

January 2013 Soybean Contract

November 2012 Soybean Contract

 

Reference

http://www.barchart.com/chart.php?sym=ZCZ12&style=technical&template=&p=DO&d=L&sd=&ed=&size=M&log=0&t=CANDLE&v=2&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate

http://www.barchart.com/chart.php?sym=ZSX12&t=AREA&size=M&v=2&g=1&p=D&d=X&qb=1&style=technical&template

http://www.barchart.com/chart.php?sym=ZSF13&style=technical&template=&p=DO&d=M&sd=&ed=&size=M&log=0&t=AREA&v=2&g=1&evnt=1&late=1&o1=&o2=&o3=&sh=100&indicators=&addindicator=&submitted=1&fpage=&txtDate

http://www.barchart.com/chart.php?sym=ZWZ12&t=AREA&size=M&v=2&g=1&p=I:30&d=X&qb=1&style=technical&template

http://futures.tradingcharts.com/intraday/ZCZ2?anticache=1352568978

http://futures.tradingcharts.com/intraday/ZSF3?anticache=1352535382

http://futures.tradingcharts.com/intraday/ZSX2?anticache=1352536711

http://futures.tradingcharts.com/intraday/ZWZ2?anticache=1352567597

http://www.investopedia.com/university/technical/techanalysis8.asp#axzz2Bndk8H5K

http://online.wsj.com/article/SB10001424127887324894104578108870189617926.html

http://stockcharts.com/school/doku.php?id=chart_school:chart_analysis:introduction_to_candlesticks