After falling to a multi-year low barely a month ago, corn futures have rallied more than 5% in the past two days and are currently trading at a multi-month high.
Large rallies off of a low have led to some consolidation and losses over the next couple of weeks, but it was a decent medium- to long-term sign of buying interest returning to a depressed market
After one of the most devastating and prolonged bear markets among any commodity, corn has finally started to perk up. With backto-back gains of more than 2%, corn futures are up nearly 15% from what had been a 52-week low barely a month ago.
Big rallies from low prices have been a mixed bag for most commodities. Unlike in stocks, buying thrusts off of a low have not consistently led to further medium-term gains.
For corn, let’s go back to 1959 and look for every time it rallied nearly 15% from a 52-week low, which it had set within the past 30 days. The table below shows its returns going forward, and we can see that the next couple of weeks were volatile with a downside bias. Between 3-6 months, however, results turned more positive, with a high win rate, good average return and positive risk/reward ratio. The results didn’t change much at all if we look at rallies from 3-year lows instead of just 1-year lows.
Overall, the recent surge looks to be a modest medium-term positive, but in the near-term it’s in danger of seeing some consolidation.
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