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Rough Rice - Who Knew? Now You Do.

Saturday  29 January 2011

 Very few people know about Rice, Rough Rice to be specific.  It
is traded on the CME, and it is a grain that is getting ready for a
breakout.  Fortunately, from a technical analysis perspective, the
names may change but the charts all read the same.  This is out
first analysis on it, and maybe your first look at it.  To get an
overview, we start with the monthly.

 A pivot line was drawn at $16, a price over which Rice must
rally to prove its next move higher.  What can be seen from the
monthly, upon a closer look, it that the current rally, while still
with a lower swing high, is already stronger than its predecessor. 
We can see the large volume bar that rallied to just under the
privot line, but price has not done the effort any justice, since.

 

 RCH M 29 Jan 11

 The current rally is compared to the previous one in both time
and price.  Beyond the stated, what next becomes of interest is
the developing trading range, simmering just under resistance. 
The real resistance is the last high at 15.81 from 9 November
2010.  Yes, it is under the pivot, by all true support/resistance
lines are not straight.  Therefore, a rally above 15.80, on strong
volume could start the true breakout. If not, we still know of the
16 area.

  RCH W 29 Jan 11

 The daily shows a four month trading range, moving further and
further along the RHS, [Right Hand Side], of the chart, headed
toward an eventual break out from the range, either up or down. 
We say it will be up, but that is not saying much, given the delicate
balance in the world food supply.  Friday's close, last bar, is high
end.  Just a comment about that close, Rice rallied from the 14.64 
daily low to 15.10 in the final five minutes before settling at 15.015. 
It is a thinner market, but someone is supporting it.

 There are two price decline with dark bars under them and
corresponding dark lines showing the volume behavior during
each decline.  Volume needs to be read in context with market
activity.  It is not something that is mechanical, like RSI, or MACD. 
In the first instance, increased volume on a decline is usually a
negative.  as volume increased, look what happened to the daily
bars.  They got smaller, until the bottom.
 

 The smaller ranges tells us that buyers are entering and
supporting prices at the lower level, and that "unseen" support
is what kept the ranges from extending lower.  We say "unseen"
because this cannot be known fully, at the time, and is an easier
read, after the fact, although the smaller ranges do provide a
clue as red flag bars.

 In the second price decline, which is also a retest of the late
December low, the smaller volume tells us that there is no
selling pressure on the price decline, so it is "technical" in
nature.  As would be expected, a rally did follow, and that
brings us to the present tense.
 
 What we see over the last few weeks of trade are many closes
on the upper end of the range.  That tells us buyers are in
control as price works higher.  There is no clear trend, so the
developing activity will be a little harder to read, but the net
effect of how Rice is developing over all three time frames lets
us know that this is a market that will soon be on the move.

RCH D 29 Jan 11