The December corn/oat spread retreated 18 1/2 cents from the Halloween high. This pullback is big enough to provide a setup for adding to the long position that we entered at the ‘even money’ level nearly a month ago.
The Halloween high of 40 1/2 cents (premium corn) sets near-term resistance. This is closely followed by the August high of 43 cents. A breakout above these tops would indicate that the December corn/oat spread is still on track for our minimum target at the one-dollar mark (premium corn). Therefore, traders can use this as a trigger to add to long positions.
For tracking purposes, the blog will make a hypothetical ‘add-on’ trade by buying one 5,000 bushel December corn contract and simultaneously selling one 5,000 bushel December oat contract if the spread closes above the August high of 43 cents. If filled, risk a two-day close of 2 cents below the November pullback low that precedes the entry.