From the Desk of Ian Culley @IanCulley
It’s not all doom and gloom out there…
I know the market’s ugly right now. Risk assets are getting crushed across the board.
But, believe it or not, greener pastures do exist in this market.
And, on days like these, I choose to focus on areas that aren’t free-falling into the fiery depths of hell.
Last week, I discussed the relative strength of the less economically sensitive grain complex. These contracts are more defensive in nature and are currently escaping the broad selling pressure.
That’s a relief!
When it comes to today’s trade ideas, I’m sticking to the individual contracts with the highest volume heading into the fall. Those are the charts and levels of the most importance.
Do the levels on the continuation charts come into consideration?
Absolutely!
Premium members can reference our Commodity Chartbook below for our structural outlook and reach out at info@allstarcharts.com with further questions.
All right! Let’s dive in!
Corn
First up is December corn:
Corn has been carving out a multi-month base since commodities peaked in the spring. The bulls have challenged the May pivot lows and a key retracement level of 688. Once that level is reclaimed, it’s off to the races.
But I want to see a daily close above the Sept. 12 pivot high of 699’2. Price action has been messy at the retracement level. So I’m raising the breakout level for confirmation.
If and when it takes out those pivot highs, I’m targeting the May high of 766. I don’t want to get ahead of myself, but a break above our target could see price challenge all-time highs and potentially find resistance around nine dollars.
Yes, nine-dollar corn! And I think it could go much higher.
Soybean Complex
Next, we have the soybean complex comprised of soybeans, soybean meal, and soybean oil.
Here’s a chart of November beans:
Soybeans pulled back to retest the June pivot highs from last year while carving out a multi-month base.
The 1508 level is the line in the sand for beans. If it’s above there, you want to be long with an initial target of 1580 and a secondary objective of 1845. If it’s below, you don’t want to have anything to do with it.
I love it when it’s that simple!
Soybean meal was the laggard during last year’s bull run in grains. It’s now poised to join in the fun: 
This is a great example of the classic base-on-base formation that we see in strong uptrends. I like taking a shot at meal if it can put in a daily close above the February high of 439.
As long as it’s above this level, I’m long with a short-term target of 460 and an objective of 545 over longer timeframes.
Soybean oil was a face-ripper last year and easily my best trade of 2021. If these grain markets get back into gear this fall, I expect the same from bean oil leading into next spring.
Before that takes place, demand has to absorb the overwhelming amount of supply at 67.50. This level coincides with a key extension level that carries plenty of price memory from earlier in the spring.
If and when the bulls reclaim this key level, the path of least resistance is higher toward 80. My bias is neutral until a decisive breakout.
Wheat Complex
For the most part, wheat is already off to the races. Yet there are still plenty of levels to trade against when it comes to the Chicago, KC, and Minneapolis markets.
Let’s start with Chicago wheat:
There are two ways to play the December contract.
You can buy weakness on a pullback toward 860. Or you can buy strength on a break above the extension level of 934. Either works, it just depends on personal preference and trading style.
Regardless of entry, our initial target is 1050, with a secondary objective near the contract high ~1250.
Of course, more basing could take place throughout the fall. Chicago wheat is off limits if and when it breaks below 860. You can’t be long below that level, and it’s certainly not a market you want to short – at least not yet.
Next, we have KC wheat:
KC wheat is on the cusp of reclaiming its March pivot low of 991. I like it long on a break back above that level, targeting 1093.
If wheat goes on a bull run, this contract could easily revisit its highs of 1377.
Last but not least, here’s one of my favorite contracts to trade: Minneapolis wheat:
I’ve had success trading this market in the past, and like the many charts above, it has plenty of upside potential.
Minneapolis wheat presents a similar setup as Chicago wheat. There are two ways you can play it. You can buy weakness or buy strength. But you can’t be long below 940. That’s the line in the sand.
If you want to nibble on longs back toward that level, go for it! If you want to wait for a break above the extension level at 995, that makes sense too.
Either approach sounds good to me as the targets remain the same – 1085 and 1230. It’s all about how you want to manage risk.
With the heightened volatility and prevalence of failed breakouts and whipsaws, I recommend playing it tight.
Remember, many of these trades have not been triggered. It could be weeks or even months before they do.
Be sure to log into our Rangefinder app to stay on top of the grain markets and all the trade ideas at All-Star Charts.
COT Heatmap Highlights
- Commercial hedgers reduced their long exposure to crude oil by 16,000 contracts last week yet hold near a three-year extreme.
- Commercials continue to buy gold as they carry their largest long positions in three years.
- And commercials added another 1,000 contracts to their long cocoa position, reaching a three-year extreme for the second week in a row.
Click here to download the All Star Charts COT Heatmap.
