We're less than eight months into 2015. But our "trade of the year" is already paying off...
Traders who took our advice to buy the Teucrium Corn Fund (CORN) are sitting on solid profits. But now, it's time to take those gains off the table...
Take a look at this updated chart of the spot price of corn...
Back in October, the chart was forming a falling-wedge pattern. This pattern forms as an asset makes lower lows and lower highs, and the distance between the lows and highs gets smaller. This is a "bottoming" pattern that often leads to a strong upside move. That's
what we saw with coffee back in 2014.
There was also positive divergence on corn's moving average convergence divergence (MACD) momentum indicator – a measure of overbought and oversold conditions. In short, as corn was making lower lows, its MACD was making higher lows. This was another sign that corn was ready to start a new uptrend.
That's exactly what we got. The price of corn bottomed at $3.20 per bushel last October. It's trading near $4.30 per bushel today.
That's short of the $5 price target I set last October. And it's shy of the red resistance line on the chart, which is at about $4.60. But it's still time for traders to take profits.
You see, successful trading isn't about squeezing the maximum profit out of each trade. It's about spotting low-risk entry points for trades, and then exiting positions as the risk of a reversal increases.
Following last month's big rally, corn is now extended to the upside. The MACD is more overbought than it has been at any time over the past year. And it's beginning to roll over.
This isn't an outright "sell" signal. The price of corn could still work higher – perhaps hitting the resistance line around $4.60. So there's another $0.30 per bushel potential profit in this trade.
But... the risk of a pullback is high.
The move in corn over the past month has been nearly straight up. So the closest support line on the chart is down around $3.70. That's a potential risk of $0.60 per bushel.
It doesn't make sense for traders to risk giving up $0.60 of profit just to make another $0.30.
It's time to sell and wait for another opportunity.