Corn ETF Holds Support: Time To Buy?

Bargain shoppers have arrived early on Wall Street ahead of Black Friday as last week’s brutal sell-off has left the marketplace scattered with ripe opportunities for seasoned veterans not shaken up from all of the volatility. Renewed optimism from President Obama that Congress would strike a deal before we drive off the “fiscal cliff” has been a major catalyst behind this week’s bounce, while encouraging housing market data has also brought the bulls back to the equity front [for more economic news and analysis subscribe to our free newsletter].

Chart Analysis

After enduring a prolonged pullback over the last two months, the Teucrium Corn Fund (CORN) has recently pumped the breaks at a major support level and appears poised to bounce higher.

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Since peaking at $52.71 a share on August 21, 2012, CORN has posted a series of lower-highs (red line), which is worrisome; however, this ETF has also managed to hold its ground above the $46 level (blue line) on several occasions. Although recent price action has been mixed, the fact that CORN has been holding above $46 a share is encouraging  because it previously bounced off this level on July 11, September 27 and most recently again on November 16, 2012 [see Most Popular Commodity ETFs].

The fact that CORN has posted lower-highs but remained above support suggests that buyers are enticed at the $46 level; this means that jumping in long offers lucrative upside potential, however, a break below this support level may also welcome accelerating selling pressures that could sink CORN to its 200-day moving average (yellow line) near $44 a share.

Outlook

If corn futures stick to the medium-term downtrend at hand, then this ETF could sink further; in terms of downside, CORN has immediate support at $46 a share followed by the $42 level. On the other hand, if bullish suspicions prove true, CORN may have the wind at its back. In terms upside, this ETF may face resistance around $48 a share followed by the $50 level. 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.

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