wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(November 6, 1997) CORN: SHORT TERM–The last USDA forecast was 9.312 bil. bu. Some more bullish traders are of the opinion that the crop will come in at less than 9.2 bil. bu. Funds have been aggressive sellers. Some traders believe they are rolling out of corn and into meal. Much of the action has probably been evening up for the report. Planting and harvest delays are just that–delays. The grain does not go anywhere, and I wouldn't attach too much credence to the spoilage story. If it's cold it won't spoil. Exports have been poor, and underscore the problem with this market. Not enough demand. El Nino may provide support, but keep in mind, that is long term, and so far, possibly non- existent.
RESISTANCE–Resistance basis December is near 286, 289-290, 295, and 298.
SUPPORT–Support remains near 278-282, 272-274, 266-268, 262, 264, 258, 252-255.
RECOMMENDATION–The chart remains negative. Aggressive traders might consider selling December corn on rallies to 281 or so with stops above 286 or 295. Look for a break to the low 270's, possibly 265 or so. More conservative traders should stay on the sidelines for now. The December options might be giving us a nice report play. They expire next Friday, so time value is negligible. 280 puts and calls are in the 4-6 cent range. 270 puts and 290 calls are near 2 cents. Either buy a put or call, or consider buying 280 selling 290 calls or buying 280 selling 270 puts for the report. If it's a surprise in either direction, it could be a nice 5-10 cents per contract trade. I don't have a strong bias at this time for the report. Regardless of what the report says, watch for a near immediate reversal. Option traders might buy March or May 280, 290, or 300 calls on breaks to the low 280's, upper 270's basis March, or if more conservative, hold out for a decline to the low 270's. Experienced option traders might buy March or May calls and sell Dec. calls for the time premium.
M. Steven Morgan
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