It's obvious we have entered a bull market in grains. Many areas of the grain market are breaking out of large bottoming patterns. The below Custom Grain Index summarizes the situation well, but as I mentioned in last week's post, I want to dive in to each individual market for a closer look.
I think one of the best ways to frame an expanding market, like the ones we see in grains at the moment, is through the use of Fibonacci Analysis. Specifically, through drawing Fib expansion levels.
The next 14 charts will cover the Bean Complex, Wheat Complex, and Corn on both the weekly and daily timeframes.
Bean Complex
Soybeans
Soybeans paused right around a confluence zone between 1175^0 and 1200^0. It took a few weeks for demand to digest overhead supply, but once it did it's been off to the races. The next area of resistance on the weekly chart sits around 1500^0.
Price has been halted at the 685.4% Fib expansion level on the daily chart. A break and close above 1380^0 could open this parabolic advance even more.
Soybean Meal
It's not clear if Soybean Meal will close above the 61.8% retracement level on the weekly chart by Friday. As of this writing it appears it will. When and if it does, we can expect the former area of resistance, around 425.0, to act as support.
Soybean Meal has respected the Fib expansion levels below since its breakout from a 14-month base, which gives me confidence in the levels that lie overhead. The next area of resistance should come in around 468.0. Of course price could blow right through this level.
Soybean Oil
The next major area of resistance for bean oil sits around 46.00 and the 61.8% retracement level. Notice the failed breakout in 2016 ran into the 38.2% retracement level.
The 138.2% expansion level is acting as resistance on the daily chart. Interestingly, the 61.8% retracement level on the weekly chart coincides with the 150% expansion level presented on the daily chart. It would make sense for price to consolidate in and around that level before moving higher.
Wheat Complex
Chicago Wheat
Chicago Wheat has tested the 50% retracement level after breaking out of a massive 6yr rounding bottom pattern. Once this level is cleared, the 61.8% retracement level will come into focus.
Support in Chicago Wheat should come in around the 630^0 level.
Kansas City Wheat
KC Wheat is on the verge of breaking out of a possible 6yr rounding bottom. The breakout level coincides with the 50% retracement level around 605^0. A projected target from this massive base sits at former all-time highs.
KC Wheat continues to bounce between the 138.2% and 161.8% Fib expansion levels. I will look for a close above 612^0 and the 161.8% expansion level as confirmation of a breakout from the larger 6yr base.
Minneapolis Wheat
I wrote some notes earlier in the week in regards to Mpls. Wheat. You can check it out here. It is still in the base building process, but recently broke out of a 2yr rounding bottom on the daily chart. The first major area of resistance is around the 695^0 level.
Support should come in around 598^0 and the 61.8% expansion level.
Corn
Corn tapped the 38.2% Fib retracement level earlier in the week. A break and close above that level would set the next significant areas of resistance at 558^0 and 615^0.
Price blew through the 261.8% Fib expansion level and is now headed towards the next level around 520^0.
A great quote from one of the founding father's of classical charting, Richard W. Schabacker, clearly states, "The most favorable buying opportunity comes as soon as the break-out shows up on the chart." Those words summarize the current situation in grains well.
The most favorable buying opportunities are behind us. Now its time to frame the advances, protect capital, and look for reasonable risk/reward set-ups.
Thanks for reading! If you have any questions or comments, please feel free to contact me at ianculley@culleycharts.com
DISCLAIMER: All information and opinions expressed by Culley Charts are strictly that, and should not be construed as investment advice. Market participation comes with inherent risk, and the responsibility of managing this risk lies solely with each individual investor.
Comments