Since the 9 years cycle turned up in October 2013, oats have rallied with strength. On early March 2014 the market made its first important reaction. Market analysis based on momentum, velocity price projections and price retracements, shows that the market may have bottomed on March 26th to resume its uptrend.
Momentum
Figure 1 is a daily price-time chart for May oat futures together with the momentum indicator. The momentum indicator is calculated for 1, 3 and 5 bars, which are 1 trading day, half a week and a whole trading week, respectively.
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| Figure 1 Daily prices for May oat futures in 2014 and momentum curves. Divergence between price and momentum indicator suggesting the possibility of a market rally. |
From Figure 1 it is possible to see that between February and March 2014 the 1-day momentum curve diverged against progressively higher prices, showing that a correction was due. A similar situation occurred in mid-March with three daily tops at 460c and a divergence against the momentum curve.
More recently, the 1-day momentum curve made higher bottoms while the price action continued making lower daily lows. Additionally, the 5-day curve in blue was diverging as well against market action. This is a first indication that the market was in position to rally on March 26th, 2014.
Velocity Price Projections
Figure 2 contains a daily price-time chart for May oat futures and the market velocity indicator which is used to make price projections.
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| Figure 2 Daily prices for May oat futures in 2014 and velocity indicator. Market velocity is used to project future prices as mentioned by Cowan and Gann. |
Figure 2 shows two price projections made for 386 1/4c and 349 3/4c. On March 26th, 2014 the market declined to 386c, reaching the first price projection at 386 1/4c, and ralling closing near the high of the day. Additionally, from the previous section, Figure 1 showed that the momentum curve was diverging against market action confirming a market rally.
Price Retracements
Figure 3 is a price-time chart for May oat futures from 2013 to 2014. It shows the 9 year cycle turning up on October 2013 and the bull market which took prices from 300c up 68% to reach 504 1/2c on March 2014. Additionally, it contains several price retracements which confirm that a rally was due.
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| Figure 3 Daily prices for May oat futures from 2013 to 2014. First important reaction from March 04th to the 26th. Price retracements related to this reaction. |
The top on January 29th, 2014 at 387 3/4c gave support to the market as it reached 386c on March 26. Note that there was a velocity price projection at 386 1/4c, making this price important for support.
The gap after the first decline following the early March top fell right at the 50% retracement point. This often is the case as pointed by B. Cowan.
After the first decline, prices rallied until the 50% of that first leg down reaching 460c. At this point the market resumed its way down to the final bottom of this reaction at 386c. Note that the top of the first rally at 460c fell at the Fibonacci retracement ratio (0.618).
These retracements coincidences together with momentum and price procetion analysis confirm that a rally was due.
Conclusion
On March 26th, 2014 May oat futures made a bottom at 386c. Momentum divergence, velocity price projections and price retracements confirmed that this could be the end of this reaction. Prices should continue to go up. A first indication would be braking and closing above 423c or the 50% point of the last leg.
Cash oat prices have rallied with a lot of strength since the 9 years cycle turned up on October 2013, getting close to all time market highs. Futures market have also rallied with strength. According to the previous study, the market could resume its uptrend.
Ricardo Da Costa
Grain Market Analysis
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