CZ5 & SX5: A Tale of 20-day Moving Averages

After a disappointing trade yesterday, CZ5 was able to rebound nicely today on the way to scoring a major outside day up. Prices fell hard in the overnight session to again test the contract's 20-day moving average for just the second time in a month. The market found technical interest at the 20-day, and just like the previous test, the indicator ignited a buying bounce. Prices found little resistance at the recently broken 100-day moving average and were able to close above yesterday's high. For the bears, the 20-day MA holds the key for further declines, while bulls will look for a push above the double top formed from the August and October highs.

Momentum in CZ5 has begun to turn over with the recent declines. The slow stochastic gave a strong sell signal in overbought territory earlier this week, but has yet to confirm the signal with a move back below 75. The contract's MAC-D on the overhand has yet to cross its signal line all-together but could do so fairly quickly with only a few lower sessions. These indicators will get a bullish boost from today's close, but it's important to keep in mind CZ5 remains four cents lower on the week, and continues to look ripe for a correction.



SX5 shares a similar technical story to CZ5. On multiple occasions, SX5 has found support at its 20-day moving average despite the markets short-term momentum switching to the bears. Unlike corn, however, beans didn't have enough buying interest to see an outside day today, and SX5 has only managed to retrace around 60% of its Aug-Sep decline. Key support for the SX5 contract sits at the combination of the 20 and 50-day moving averages, which both sit near 985 today. Breaking this support would indicate a move back to 950. On the flip side, upside resistance sits at last week’s high just above 1030, while the contracts 100-day moving average at 1044 should provide very strong resistance on a further rally

Copyright 2014, The Andersons, Inc. 480 West Dussel Drive, Maumee OH 43537. All rights reserved. Opinions expressed are believed to be factual, but not guaranteed. We are not making any recommendations to trade regulated or unregulated markets. Nothing stated implies applicability to your situation. The Andersons is a party to cash grain contracts - physical delivery is required.