Time to Switch
The IMC blog entered a short position in the Nov-Dec feeder/corn (x4) spread at -$2,662.50 (premium corn) on September 6th. The November feeder contract is about to expire and the First Notice Day for the December corn contract is just a couple of weeks out, so we’re going to roll to the March 2017 contracts right now.
The March feeder/corn (x4) spread made a double top formation back in August and fell to a four-month low by mid-October. The current three-week rally has now brought it into a technical resistance area at the Fibonacci .382 retracement of the entire decline and the declining 50-day Moving Average. If you aren’t already short or you’re looking to add to the position, this would be a good place to do it!
Don’t forget that we’re looking for the spread to ultimately descend to the -$40k area at a minimum. This is not a guarantee, of course, but it’s based on decades of price history. This gives us favorable probabilities. Therefore, we will be watching closely to see if a low-risk setup materializes to allow us to pyramid the position.
Buy back the short 50,000 lb. November feeder cattle contract and simultaneously sell short a March feeder cattle contract. Also, sell the four 5,000 bushel December corn contracts and simultaneously buy four 5,000 bushel March corn contracts. Risk the March feeder/corn (x4) spread to a two-day close above even money.