As I recently discussed, banks, mutual funds, hedge funds and other institutional funds have been rotating out of the NASDAQ and into the S&P 500 and Dow Jones in recent weeks.
Although this has been leading to moderately bullish price action in select blue-chip stocks such as International Business Machines (NYSE:IBM), more explosive, high-momentum moves have been coming from various commodity-based ETFs (which have a low correlation to the direction of the overall stock market).
Today, I share with you the technical setup of one of the best-looking ETF trade setups out there right now.
Corn Is Popping!
Designed to follow the price of continuous corn futures contracts, the Corn ETF (CORN.LSE) broke out from a short-term consolidation on heavy volume yesterday (March 31), after a three-week consolidation.
Note the drop off in volume during the base of consolidation, which was bullish:
The “undercut” of the 20-day exponential moving average that occurred on the morning of March 31 was followed by a breakout above the high of the recent range (from shakeout to breakout in a few hours).
Confirming the massive intraday reversal and breakout was a huge volume spike (nearly 400% it average daily volume).
Whenever volume suddenly surges so massively as a stock/ETF breaks out above a tight range, it is the undeniable footprint of institutional buying activity, which acts as a gas pedal to propel the stock/ETF higher in the near to intermediate-term.
Corn Confirmation On Weekly
Since a key part of our technical analysis is always looking for confirmation on multiple time frames, let’s zoom out to look at the longer-term weekly chart of CORN:
On the weekly chart above, notice the tight price action near resistance of the 40-week moving average (similar to 200-day moving average) over the preceding four weeks.
When the price of CORN broke out yesterday, it pushed above the highs of that 4-week range. It’s also quite bullish that yesterday’s volume alone nearly equaled turnover the entire previous week.
With such strong volume confirming a clean weekly breakout and trend reversal, bullish momentum is likely to carry $CORN substantially higher over the next several weeks.
As such, we have added CORN to today’s Wagner Daily watchlist as a potential buy entry in our ETF portfolio. Regular subscribers should note our exact buy trigger, stop, and target prices for this trade setup in the “Watchlist” section of today’s report.