From the Desk of Ian Culley @IanCulley
I can’t stop talking about the softs trading on the NYMEX.
Coffee, cocoa, and OJ are all ripping higher. It seems only a matter of time before sugar and cotton join the fun.
So can we extend an underlying bullish thesis for ag commodities to the grain contracts traded on the CBOT?
I don’t think it’s that simple. Regardless, I want to be prepared if and when the Chicago grain markets break out…
Let’s review the most actively traded contracts for corn and the soybean complex. First up…
Corn
Here’s the May corn futures contract:
There are two ways to play it.
You could buy strength above 684, targeting 765. Or you could sell weakness on a break below 639, targeting 575.
Both work. It just depends on the next directional move.
“Hey, Ian, it seems like you’re cruising for a bruising at these levels. Are you talking about breakout signals within a broader range?”
Yes, I am! But here’s the thing…
Both risk levels have numerous contact points. The market is telling me those levels are important.
I believe a decisive breakout could lead to a retest of the contract highs, while a breakdown likely revisits the July pivot lows.
We’ll see. But my bias remains neutral for now.
Soybean Complex
I like the multi-month base in the May soybean contract:
Beans are running into resistance at the former June 2022 highs.
Like corn, they continue to absorb overhead supply, pounding the resistance level since late last year.
I like buying strength above 1,544 with an upside objective of 1,725 (161.8% Fibonacci extension).
To be clear, we can only deem a breakout valid on a daily close above our risk level.
I don’t want to have anything to do with soybeans below 1,544. It’s that simple.
Soybean meal has been the star of the bean complex since last fall.
Notice that, unlike corn and soybeans, meal held within a bullish momentum regime as it consolidated last year – a clear sign of underlying strength.
It’s no surprise it led to an upside resolution and a sustained uptrend.
Fast-forward to today, and May soybean meal is coiling within a tight range above a key extension level of 473.50.
If and when it breaks out of that range (a close above 485.30), I’m buying strength with 535 in my sights.
Last but not least, here’s soybean oil:
I’m prepared to trade soybean oil in either direction – it’s a similar setup as corn.
I like buying a break above the December closing high of 65.58 with an initial target of 71.20 (the November closing high) and a secondary objective of 76.73 (the May contract high).
I’m also prepared to short bean oil on a break below 59.27, targeting a downside-measured move of 49.50.
You might find it surprising, but I don’t care how it resolves. My concerns lie with having orders in place and managing risk – and playing with my kids.
That’s about it.
Next week, I’ll cover the wheat markets and the potential bottoming formations underway.
Stay tuned!
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