After a dismal showing last year, the Teucrium Corn Fund (CORN) gave investors hope that 2014 would be different with an impressive that last from early January through late April.
Those hopes have been dashed, at least for the time being as CORN has plunged 22% since April 29, entering a bear market in the process. On Wednesday, CORN was one of just four non-leveraged ETFs to hit a new 52-week low after falling almost 1.7%.
The slide for corn futures has been so severe that the commodity resides around four-year lows. For the adventurous, CORN now has the looks of an ideal contrarian play. That after CORN was one of the 10 worst non-leveraged ETFs in May. [May's Worst ETFs]
Since corn “put in a rounded bottom that got many traders interested as it started higher earlier this year. But the failure in May has led to a steep pullback and a possible double bottom. The signs that suggest this may be are the pennant falling over the last week with a RSI that is technically oversold and a price that is very extended to the downside from the 50 day SMA,” notes Greg Harmon of Dragonfly Capital.
Working against CORN and corn futures in the near-term are expectations that the USDA will boost its average corn crop yield estimate to 166.8 from 165.3 last month, according to Drovers Cattle Network.
The USDA has also rated three-quarters of the US corn crop as “good” or “excellent,” the best outlook for this period of the year since 1999. Moreover, looking abroad, China, the world’s second largest corn producer, has also projected a record crop year while Brazil and Ukraine also expect large crops. [Summer Rains Wash Away Corn ETF's]
Should the aforementioned technical scenario reverse, “traders will be looking for a ‘V’ to the upside to complete and Adam and Eve bottom. The contrarian play would be to get long now against a stop at new lows and play for a rise to the 520 level. From there if the Adam and Eve bottom does play out three could be quite a bit of upside. Lots of room to be a hero,” according to Harmon.
Teucrium Corn Fund
ETF Trends editorial team contributed to this post.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.