1. Econ 337, Spring 2012 ECON 337: Agricultural Marketing Chad Hart Assistant Professor chart@iastate.edu 515-294-9911

2. Econ 337, Spring 2012 Today’s Topic Charting and Technicals

3. Econ 337, Spring 2012 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. Econ 337, Spring 2012 Seasonal Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

5. Econ 337, Spring 2012 Seasonal Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

6. Econ 337, Spring 2012 Corn Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

7. Econ 337, Spring 2012 Soybean Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

8. Econ 337, Spring 2012 Cattle Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

9. Econ 337, Spring 2012 Hog Pricing Patterns Source: USDA, NASS, Monthly Price Data 1980-2011

10. Econ 337, Spring 2012 Charting Channel lines

11. Econ 337, Spring 2012 Sell Signal Sell signal A sell signal is one close below the charting lines

12. Econ 337, Spring 2012 Buy Signal Buy signal Some chartists need only one close above the charting line to create a buy signal, others use two closes above.

13. Econ 337, Spring 2012 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. Econ 337, Spring 2012 Key Reversal A key reversal is when the daily high and low price range exceed the price range for the previous two days.

15. Econ 337, Spring 2012 Gaps Gaps often occur when a major new piece of information hits the market. They are often filled in by later price movements.

16. Econ 337, Spring 2012 Double Tops & Bottoms Double tops and bottoms show prices with major technical resistance. These can be several days apart.

17. Econ 337, Spring 2012 Head & Shoulders Source: Figure 7, Charting Commodity Futures Ag Decision Maker, File A2-20

18. Econ 337, Spring 2012 Moving Averages 9 day average 18 day average 40 day average Sell signal Buy signals

19. Econ 337, Spring 2012 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. Econ 337, Spring 2012 RSI for May 2012 Soybeans

21. Econ 337, Spring 2012 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. Econ 337, Spring 2012 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. Econ 337, Spring 2012 Class web site: http://www.econ.iastate.edu/~chart/Classes/econ337/ Spring2012/ Have a great weekend!