1. Agricultural Marketing
ECON 337:
Agricultural Marketing
Lee Schulz
Assistant Professor
Chad Hart
Associate Professor 1

2. Charting and Technicals
Today’s Topic
Charting and Technicals

3. Seasonal Patterns
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

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

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

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

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

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

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

10. Charting
Channel lines

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

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: Quiz on Thursday.
Quiz on Thursday.