Tuesday’s ETF Chart To Watch: Teucrium Corn Fund (CORN)

by on March 22, 2011 | ETFs Mentioned:

Global markets started the week on a positive note, with domestic indexes jumping aboard the bull on Monday. Worse than expected housing data was largely ignored by investors, as the market instead focused on Tiffany’s robust profits and talks of AT&T buying T-Mobile. The jump in equities was warranted with a rise in energy prices as well. Crude oil jumped over the $100 mark again, as investors responded to the political developments in Libya that took place over the weekend. An international coalition launched air-strikes in Libya starting on Saturday, while pro-democratic protests erupted in Syria. A weaker dollar and upbeat equities helped pushed gold higher as well, with the precious metal gaining $1o for the session, closing at $1,426 an ounce. Treasures also crept higher, suggesting that investors are still cautious and not entirely convinced of the market’s recent recovery following last week’s sell-offs.

Agricultural commodities have lost the spotlight lately due to surging oil prices. Nonetheless, global food consumption is still expected to increase and the current dip in grain’s prices might be a great time to establish long positions.

Consider Corn

CORN, issued by Teucrium, allows investors to gain exposure to the price of corn, since the underlying holdings of this fund consist of corn futures contracts traded on the CBOT. CORN’s most recent correction was from November 9th, 2010, till the 23d of the same month, during which the fund lost nearly $4 (10% decline). At the time, the fund had undergone a significant correction, and we hinted to investors that current levels were attractive for those wishing to establish long positions [see Fibonacci Explained With The Corn ETF]. Since then, our technical analysis of CORN has proven to be quite precise. Since November 25th, the fund has returned just over $7, or 20%.

CORN is once again on our radar as the fund has recently corrected, shedding over 13%, between March 4th-16th. Consider the chart below. By drawing a Fibonacci Retracement from the past trend low to the recent peak, we get projections of likely levels that CORN may retrace down to. As we can see from the chart, CORN has nicely bounced off of the significant 61.8% level. In fact, CORN has aggressively traded higher sine its recent low on March 16th. Unless the uptrend is disrupted with CORN closing the week below $41-$40 a share, then it’s probable that the fund will continue to inch higher and attempt to set new highs past $44.50 [see Commodity ETFs Get No Love From Investors].

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Investors seeking additional confirmation that CORN is in fact in an uptrend, can wait for the 20 day moving average to definitively remain above the 50 day moving average in the coming days. If the shorter term price average remains higher than the longer term price average, then prices are likely to continue climbing [see Simple Moving Averages Explained]. If we assume that CORN has gotten back on track, and resumed its longer-term uptrend, then we can use a reverse Fibonacci Retracement (from the recent peak to the low), to project levels that the fund is likely to encounter resistance at as it fights its way back up. We can see that once CORN is able to close above its high of $44.5, then the next probable price target comes in at just over $48 a share.

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Investor sentiment is the leading driver of price action and uncertainty is still a dominant theme. Thus, if volatility persists, CORN might be range-bound between $40-$45 a share in the coming weeks. A daily close below $40 a share would call for a re-consideration of the discussed uptrend. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.

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Disclosure: No positions at time of writing.