Melvin Brees
Farm Management Specialist
University of Missouri Extension




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February 2, 2001

Technical Price Goals for Stored Grain

After several weeks of lower prices, having stored corn or soybeans is a discouraging position to be in. Will prices ever rally? If they do rally, what price goals or sales targets should you have?

There are two approaches to market analysis--fundamental (evaluating supply and demand factors) and technical (studying price action and charts) analysis. Technical analysts believe that prices move in certain chart patterns that often repeat themselves. Technical analysis and charts are readily available in many marketing newsletters.

Support and Resistance Prices: Support price levels occur where previous price declines have stalled or market price lows have occurred. Resistance prices are where previous rallies have stalled or market highs have occurred. Short-term trends often change when those in the market buy at support levels (attempting to buy cheap) and sell at resistance levels (attempting to sell high). This increased activity tends to change the trend. If these support or resistance areas are broken, their role may reverse. For example, if prices go above a resistance price level, the resistance now becomes support. Resistance prices can be used as upside price goals and support prices as downside "bail out" prices to limit losses if the support is broken.

Gaps: Gaps appear in price charts when one day's trading range occurs at higher or lower levels than the previous day, leaving a range of prices where no trading occurred on either day. Technical analysts expect many of these gaps to eventually be filled, suggesting prices will return to the area where the gap occurred. These gaps may also serve as support or resistance.

Retracements: Once a market low or high occurs, market prices often rebound or retrace a portion of the move. Analysts often look for a 40%, 50% or 60% retracement with a 50% retracement the most common. These expected retracements provide price targets if prices begin to make a recovery.

It's important to understand that technical analysis doesn't always work. Prices may "blow through" support or resistance levels. Futures contracts often expire with gaps unfilled and retracements may fall short of expectations. In spite of these shortcomings, technical analysis works often enough to be useful as a planning tool for setting price targets.

Current supply and demand factors, especially for soybeans, are very negative and limit the likelihood of any sustained price rally. However, many analysts believe the markets are "oversold" and due for, at least, a small "technical" bounce. In a market recovery fueled more by price action than supply or demand, setting price targets for moving stored grain using technical information seems to make some sense.   --Melvin

University of Missouri ExtensionDecisive Marketing - February 2, 2001 -- Revised: April 20, 2004