So You Want a Contrarian Play…… Try Corn
- Posted by Greg Harmon
- on July 9th, 2014
Everyone want to be a contrarian. To be a superstar and pick a bottom. Become famous for calling the top. It is not easy to do and in my view a fools game, unless you are not really involved in the markets day-to-day. I wrote a little bit on my thoughts of being a contrarian in When To Be A Contrarian last week.
But if you want to be a contrarian there is a scenario setting up in Corn ($ZC_F) worth watching. The chart below starts at the large gap down that happened in July last year. Since then it put in a rounded bottom that got many traders interested as it started higher earlier this year. But the failure in May has led to a steep pullback and a possible double bottom. The signs that suggest this may be are the pennant falling over the last week with a RSI
that is technically oversold and a price that is very extended to the downside from the 50 day SMA. Should it reverse traders will be looking for a ‘V’ to the upside to complete and Adam and Eve bottom. The contrarian play would be to get long now against a stop at new lows and play for a rise to the 520 level. From there if the Adam and Eve bottom does play out three could be quite a bit of upside. Lots of room to be a hero.
The Corn ETF ($CORN) looks much worse. If you are not going to trade the futures then you are taking a bigger risk, or looking to become a bigger hero. Good luck future pundits.
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Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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