From the Desk of Ian Culley @IanCulley
Commodities love the falling dollar.
Crude oil is breaking to multi-month highs. Copper is approaching the 4-dollar level. And Silver is ripping!
I’ll have more on the precious metals front Monday with your weekly Gold Rush.
Today, I’m focusing on the grain and livestock markets. The dropping dollar has helped line up a long list of fresh trade ideas: potential failed breakouts, possible failed breakdowns, and critical levels to trade against…
Let’s get to it!
First up – It’s corn!
Corn – Failed Breakdown?
We might have a failed breakdown on our hands…
Corn futures broke down to their lowest level since early 2021 only to quickly reverse higher.
Check out the Dec. contract:
I like giving Dec. corn a shot from the long side, but only if it’s trading above 490.
The 14-day RSI reached overbought conditions last month yet failed to post an oversold reading during the recent selloff. That’s a constructive development for the bull case as buyers step in, hammering out a floor in the market.
I don’t want to give this trade too much room or time. I’m out if corn can’t close above 510 by the end of next week.
Soybean Complex
Soybeans – Cup & Handle
Soybeans are pressing toward fresh year-to-date highs and the upper bounds of a possible cup & handle formation.
A decisive close above 1377 completes the bullish consolidation and flashes a buy signal.
I like entering a long position on the breakout as the cup & handle pattern could act as a launch pad for the next leg higher.
However, the former supply zone at approximately 1400 poses a significant hurdle for the bulls. I won’t give a long position much room below my risk level.
Soybean Meal – Coiling
Of all the charts in today’s post, I dislike soybean meal the most.
It’s not a terrible chart. It’s simply trading within a broad range.
Sure – it’s coiling between two key retracement levels, but it’s messy:
Opinions aside, the 410 level represents a logical area to define risk. It coincides with a retracement level that price has respected from above and below over the trailing six months.
I’ll consider buying Dec. bean meal on a break above that level, targeting 437.
But honestly, I’d rather trade soybean oil…
Soybean Oil – Demand Meets Supply
Dec. soybean oil is forming a potential bull flag below a critical area of former resistance:
Price is correcting through time as momentum holds near overbought conditions, digesting a bearish divergence following an upside momentum thrust.
The momentum profile and buoyancy in price indicate the bulls are steering the ship as they absorb overhead supply.
I’m long Dec. soybean oil if and when it closes above 62, targeting 71. I’m also monitoring the 14-day RSI for an overbought reading to confirm the breakout.
Wheat Complex
Chicago Wheat – Much Ado About Nothing
The Sept. contract for Chicago wheat reminds me of the soybean meal chart.
There are logical levels to trade against. But it doesn’t mean we should.
I can see buying a break above 675 with a target of 732. I won’t take this trade, though.
Instead, I’ll focus on more constructive charts…
KC Wheat – Bulls Need to Take Control
The KC wheat contract is a far better-looking chart:
The multiple contact points at the resistance level of approximately 895 outline an area I’m comfortable taking a position against.
Unfortunately, KC wheat is trading almost a dollar away from triggering a buy signal. And momentum remains in a bearish regime.
The bulls have their work cut out for them.
If and when they drive price above my risk level, I’m buying strength with an initial target of 995.
Minneapolis Wheat – More of the Same
Mpls. Spring wheat is carving out a similar base to KC wheat. It’s almost a carbon copy minus the price levels on the y-axis.
Notice the bullish momentum divergence beginning in March and the overall improvement in the 14-day RSI. Both reveal a constructive basing formation underway.
The breakout level for spring wheat stands at 905. If it’s above there, the initial target lies overhead at approximately 985.
Livestock
Live Cattle – Failed Breakout or False Start?
Live cattle futures are pressing toward fresh all-time highs.
But as this multi-year uptrend matures, I expect a significant correction during the year's second half.
Meanwhile, I won’t let that stop me from taking a shot from the long side if it’s trading above 177.
As long as it’s above that level, I’m targeting 185.50.
Feeder Cattle – Parabolic Advance, Waning Momentum
Feeder cattle have ripped alongside the more mature live cattle.
Check out the parabolic advance since last fall:
Interestingly, feeder cattle futures are posting a four-peak bearish momentum divergence.
The uptrend for feeder cattle is likely entering the latter stages. I also expect a strong downside correction for this contract later this year.
Regardless, I like it long against 243 until then, with an upside objective of 256.
Lean Hogs – Hogs Cut Loose
The ziggy piggies haven’t done much as cattle have exploded to the upside.
Perhaps it’s lean hog futures turn to have some fun.
Here’s the Aug. contract breaking above a well-defined polarity zone at 94.50:
I like it long toward the contract highs at roughly 108. But only if it holds above 94.50.
That’s it for today.
Are you buying a squeeze in corn? Or do you prefer to trade a breakout in soybeans or bean oil?
Perhaps it’s time to short cattle futures?
Let us know what you think. We love hearing from you.
COT Heatmap Highlights
- Commercial hedgers lighten their long position for the Japanese yen yet hold within five percent of three-year extremes.
- Commercials continue to pile into Palladium, reaching another new record-long position.
- And commercials begin to unwind their long position for Crude oil, dropping roughly 23,000.
Click here to download the All Star Charts COT Heatmap.
