Technical Analysis (October 3, 2011)
Corn:
Corn for the week of Oct 3rd is moving in bearish mode. Both the 12 week and 26 week moving average lines are below the zero line. There has been no buying/selling signal because these two lines (slow moving and fast moving have not yet crossed) this could indicate there is still more bearish territory ahead. The last crossing of the Zero line occurred in mid September into bearish territory. In addition, the last crossing of the slow and fast moving average was September 1st could be considered the indicator for a selling signal in the market.
Soybean:
Last week, soybeans’ price at first increased by 4 cents from 1259.6 to 1263, which is just a tiny rebound from previous big drop. However, in the following days, because the herd mentality and fears in the market. Soybeans price continued its downward trend and dropped to 1179 which is the ending price at last Friday. The market is still bearish for the fast moving average is below the slow moving average. And what’s more, the MACD is also in bearish territory, even MACD only provide a strong signal when the slowing moving average crosses with the long moving average. Even RSI is 17.44 which is obviously oversold, but we do NOT suggest to take long position at this moment. The reason is quite simple. Fears dominated the market and people tend to be irrational right now.
Wheat:
Last week, although the general price trend of wheat was bearish, the price of wheat was moving in a fluctuated mode since its price increased twice last week, which was on Sep 27 and Sep 29. The two fast moving averages were continuously to be below the slow moving average. The RSI did not indicate any oversold or overbought in last week. The MACD continuously indicates that the wheat still stays in a bearish territory since the fast moving average across below the slow moving average from the very beginning of September, and it never crosses above the slow moving average from that time. These indexes all indicate that the market of wheat is still in a bearish mode.
GLOSSARY
MACD What is MACD?
MACD stands for Moving Average Convergence-Divergence. It is an indicator that shows the relationship between two moving averages, one is 12-day exponential moving average (EMA) and the other one is 26-day EMA. (In TradingCharts.com, they use 12-week and 26-week instead of 12-day and 26-day EMA.)
Why MACD is important for the technical analysis?
It is important because it shows the changes of the current market trend. It is like a signal of buy or sell, and it is commonly used by many traders.
How to calculate?
MACD=12 EMA - 26 EMA (which is the fast EMA minus the slow EMA)
MACD Signal Line=9-day EMA
MACD histogram: MACD - signal (the difference of fast and slow EMA minus 9-day EMA)
How to interpret?
There are three significant signals generated by MACD, MACD line crosses the signal line, MACD crosses zero, and the divergence between the MACD line and the stock price.
MACD line crosses the signal line: BUY when the MACD line crosses up the signal line because the market now is bullish, and SELL when the MACD line crosses below the singal line because the market is bearish. Since the MACD histogram is the difference between MACD and signal line, it can also give a signal of sell and buy. A narrowing MACD histogram represents that two lines are going to approach, but a widening MACD histogram predicts that the current trend would be stronger.
MACD line crosses zero: It provides the change of trends. If it moves from negative to positive, the market is bullish. If it moves from positive to negative, the market is bearish.
Divergence: “Positive divergence between the MACD and price arises when price hits a new low, but the MACD doesn't. This is interpreted as bullish, suggesting the downtrend may be nearly over. Negative divergence is when the stock price hits a new high but the MACD does not. This is interpreted as bearish, suggesting that recent price increases will not continue.”--cited from Wikipedia MACD
Reference:[1]http://en.wikipedia.org/wiki/MACD [2]http://www.investopedia.com/terms/m/macd.asp#axzz1ZloOAFea [3]http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_average_conve