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The rough rice market at the CBOT has been in quite a downtrend, with prices
tumbling to levels not seen since 1993. Back in 1993 I had the pleasure of
assisting a major commercial rice concern with some of their brokerage needs.
The head trader back in 1993 loaded up on rice futures when prices dropped to
the bottom 5% of the last 10 year's range. Looking at a monthly chart on
CQG, I currently see a high of $13.00 back in December of 1993 and a low of
4.76 in April of 1993. That is a difference of $8.24. Five percent of $8.24
is roughly 41 cents. Forty-one cents added to the $4.76 April 1993 low is
$5.17.
Yesterday the spot November contract closed at $5.27, a mere 10 cents away
from that support level. The more active January contract closed at $5.36.
Thus, the comparable support level for January would be $5.26, today's exact
low strangely enough. January rice closed today at $5.41, up 5 cents for the
day and on the high of the day.
January rice also set up for a possible buy for tomorrow morning for a swing
trading model I have. We shall look at the market action of the first hour
of trading and see.
It is interesting to note that wheat is trading below its 5% level of the
last 10 years. The high of $7.50 made in March of 1996 and the low of $2.30
1/2 give a difference of $5.19 1/2. That works out to about $.25, which
added to $2.30 1/2 equals $255 1/2. December Chicago wheat stands at $2.47.
Corn is trading in this bottom 5% range for the last 10 years, but it
probably is more significant to go back to the lows of the mid 1980s when
calculating this.
The low wheat prices could portend to even lower rice and other grain prices.
Or maybe. BTW, I posted the $5.26 support level before the open on
www.marketforum.com, so this number was not generated with hindsight. It is
nice to get lucky once in awhile though, if even for just one day. :-)
Regards,
John J. Lothian
Disclosure: John J. Lothian is the President of the Electronic Trading
Division of The Price Futures Group, Inc., an Introducing Broker.
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