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Corn, wheat & soybeans bounce back in October, but will the recovery continue?

Grains have taken a beating this year, falling significantly throughout the summer months, but have staged a good recovery throughout October. Is this likely to be sustained into November or are these markets running out of gas?

We will start by looking at the daily chart for corn.

If you are a regular follower of my articles for InterTrader.com you will know I am a big fan of Fibonacci levels. In the chart above you can see that corn has managed to stage a good recovery to the first 23.6% Fibonacci retracement target and resistance at 364/365. Although we managed a little spike above here on 28 October we halted at the 100-day moving average and failed to close above that important Fibonacci resistance. This therefore cannot be counted as a break higher. You can see how there is congestion from late-July lows and much of the price action through August, that coincides with this Fibonacci level, has given that resistance extra weight.
As I write we are hovering around the 365 level and you can see that the stochastic oscillator has been sitting in overbought territory for the last two weeks. Corn has been in a bear trend now for at least two years in fact, with the second half of this trend starting in May of this year. Therefore at this stage I believe the four-week recovery can only be described as a bounce in a longer-term bear trend. I think that there is a very strong chance we have reached a peak for this bounce and prices could start to turn lower into November. Only a break and at least a couple of daily closes above the 100-day moving average at 373 would force me to question whether corn can recover a little further.
Moving on to soybeans, the daily chart below paints quite a similar picture to that of corn.

Again soybeans have been in a bear trend for about two years with the second half of this trend starting in May of this year. We have also seen an excellent recovery throughout October to reach the 38.2% Fibonacci retracement target and resistance at 1035. Again the price action in the second two weeks of August shows that the 1035 area acted as good support and once broken, acted as good resistance in the last week of August and the first week of September. This again adds extra weight to this important resistance area. The blue line represents the 100-day moving average and is at 1050 today. I would need to see at least a close above here for a couple of days before I could consider further gains possible in this market.
Unsurprisingly the picture is almost identical for wheat.

The bear trend durations are exactly the same as is the recovery period throughout October. We are also testing the 23.6% Fibonacci target and resistance at 537 which is only just a fraction below July and August lows as you can see in the daily chart above. Again the blue line represents the 10-day moving average and is located at 546. I doubt I need to repeat that I would need to see a couple of daily closes above this point in order to have a more positive outlook.

 

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