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ECON 337: Agricultural Marketing

Explore the accuracy of price patterns in agriculture linked to supply, demand, storage costs, and livestock cycles. Learn about charting techniques, buy & sell signals, resistance, support levels, and technical indicators like RSI.

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ECON 337: Agricultural Marketing

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  1. ECON 337: Agricultural Marketing Chad Hart Assistant Professor chart@iastate.edu 515-294-9911

  2. Charting and Technicals Today’s Topic

  3. A price pattern that repeats itself with some degree of accuracy year after year. Supply and demand Often sound reasons Widely known Linked to storage cost or basis patterns in grains Linked to conception and gestation in livestock Seasonal Patterns

  4. Seasonal Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

  5. Seasonal Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

  6. Corn Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

  7. Soybean Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

  8. Cattle Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

  9. Hog Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

  10. Charting Channel lines

  11. Sell Signal A sell signal is one close below the charting lines Sell signal

  12. Buy Signal Some chartists need only one close above the charting line to create a buy signal, others use two closes above. Buy signal

  13. Resistance and Support Resistance level: A price level where the market seems to hit and bounce down Support level: A price level where the market seems to hit and bounce up

  14. Key Reversal A key reversal is when the daily high and low price range exceed the price range for the previous two days.

  15. Gaps Gaps often occur when a major new piece of information hits the market. They are often filled in by later price movements.

  16. Double Tops & Bottoms Double tops and bottoms show prices with major technical resistance. These can be several days apart.

  17. Head & Shoulders Source: Figure 7, Charting Commodity Futures Ag Decision Maker, File A2-20

  18. Moving Averages 9 day average 18 day average 40 day average Sell signal Buy signals

  19. Relative Strength Index • Looks at last X days worth of closing prices • X = 9, 14, 30, etc. • Summarizes upward and downward price movements during the period • Record the last 14 days worth of price changes, based on closing prices • Sum the positive and negative price changes and create average for each • Relative Strength Index = (Up average/(Up average + Down average))*100

  20. RSI for May 2012 Soybeans

  21. Relative Strength Index RSI’s above 70 (80) are considered signals of a market due to decline RSI’s below 30 (20) are considered signals of a market due to rally

  22. Does Technical Analysis Work? Arguments for it: • Real world markets are not perfectly rational • Markets may be slow to respond to new information • Technical analysis works with the psychological biases • It works because so many people use it • Self-fulfilling Arguments against: • Efficient market hypothesis • The current price holds all of the relevant information

  23. Class web site: http://www.econ.iastate.edu/~chart/Classes/econ337/Spring2012/ Have a great weekend!

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