Nice Ride, Bro
A hypothetical long position in the July 2016 bean oil/corn spread was entered at -$2,760.50 (premium corn) on October 9th. The blog was initially risking a two-day close $200 below the September 15th contract low.
In the last part of December, the bean oil contract finally regained a premium over the corn contract. This took the spread to the highest level in six months. It’s not too far from price resistance at the 2015 high of +$1,087.50.
During this climb from the September low, the spread has made two noteworthy pullbacks before resuming the rally. The most recent was the dip into the December 17th low of -$837.50. New multi-month highs followed shortly after. Therefore, the mid-December low is near-term price support.
Additionally, the rising 50-day Moving Average will soon reach the December 17th low. The spread has not closed below the 50-day MA since early October. A two-day close below the 50-day MA and a break of the mid-December low could indicate that the run is over. Therefore, we advocate exiting stage right if that happens. Like the song says, “Go on, take the money and run”.
On the hypothetical long position in the July 2016 bean oil/corn spread entered at approximately -$2,760.50 on October 9th, exit on a two-day close below the 50-day Moving Average.