Sunday 30 January 2010
One way to get the most from taking positions in a market is to
choose the strongest in a group. We showed all the important
time frames for each of the grains and gave an analysis for beans,
corn, wheat and rough rice. A look at the respective weekly charts
will show why corn is the strongest, not by much over beans, and
for this reason, anyone seeking to take a position in this complex
would do well to focus on the strongest to obtain the best results.
When you look at corn versus beans, corn has not evolved into
a small trading range as beans have in the past week. Corn has
doubled in price, beans have not. Corn is in the middle of the up
trend channel. It is showing the most strength.
It is when you compare charts that the relative strength factor
becomes apparent. While clearly in a strong uptrend, beans are
moving now sideways and are at the channel support line, not
above it, like corn. Will one make more or less in buying beans
over corn? It really does not matter. Over a period of making
trades based on buying the strongest over the less strong, the
results will speak for themselves.
This is a function of strength having already been proven in both
corn and beans, and the likelihood of it continuing is high, certainly
higher than wheat or rice, at this point.
Wheat is still under the 50% area of the all-time highs and recent
lows. The half-way measure is just a gauge to determine the
underlying strength of a trend. When under that level, it is
relatively weak. When price can hold above 50% retracements,
it is relatively strong. There is no contest between the two above
and wheat. There is excellent upside potential, but for now, wheat
still needs work, and buying it requires more selection in entry.
We could be wrong in placing rice lower than wheat because
rice looks to be on the verge of an upside breakout. Wheat has
already made a few attempts, so it was given a place ahead of
rice. In the end, either one could outperform the other, but
relative to corn and beans, going long the first two should
provide the best outcome.
To read the rice article, see Rough Rice - Who Knew?, click on http://bit.ly/f5JBPg.