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Corn Prices Could be Headed in One Direction for All of 2013
A real-world example of how EWI's Futures Junctures used objective Elliott wave analysis to anticipate the 2011 crash in cocoa

By Nico Isaac
Fri, 01 Mar 2013 13:30:00 ET
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Today we discuss the often-exciting Elliott wave pattern known as the Ending Diagonal, a terminating pattern that signals exhaustion of the larger trend. It can only unfold in the final position of a wave sequence, most commonly as wave 5 of a 5-wave impulse, or wave C of an A-B-C correction. It exhibits these specific traits: 

  • Unfolds in five waves (labeled 1-5) wherein each wave subdivides into three smaller waves
  • Wave 4 ends in the price territory of wave 1
  • The trendlines that connect the extremes of waves 1 & 3, and waves 2 & 4 converge 

The best part is: Once an ending diagonal is over, a swift and powerful reversal will follow. And by swift, I mean the move retraces the entire pattern in 1/2 to 1/3rd the time it took for the diagonal to form.


Now that you know what an ending diagonal is, let's consider a real-world example in a popular commodity market. This takes us to the March 2011 Monthly Futures Junctures' "Featured Market" segment on cocoa.


There, EWI's senior analyst and Futures Junctures Service editor Jeffrey Kennedy presented multiple charts of cocoa that showed a very long-in-the-tooth, multi-year ending diagonal. Jeffrey's message was clear:


"Cocoa has been tracing out an ending diagonal.... Prices are advancing in three waves in wave 5 (circled) to new highs beyond the December 2009 peak of 3510. The final three wave move to new highs will set the stage for a sizable and lengthy bear market in cocoa in 2011."


In early March cocoa prices followed part one of their Elliott wave script: they rallied "beyond the December 2009 peak of 3510" to its March high of 3775. In the March 2011 Monthly Futures Junctures, Jeffrey confirmed that the final piece of the topping picture had fallen into place. He wrote:


"Now that the requirements of a completed diagonal have been met, the stage is set for the next act: a more than complete retracement of this pattern."  


What followed: From their 3-decade peak in March, cocoa prices plunged more than 45% to log their steepest losing streak in FIFTY years.


Ending diagonals are at the top of the favorite Elliott wave pattern list for good reason: They don't open the show; they are the main event.


And in the February 2013 Monthly Futures Junctures' all-digital "Featured Market" webisode, Jeffrey reveals that a huge, multi-year ending diagonal pattern has ended in corn. The takeaway as Jeffrey sees it:


"We can look for [corn] prices to trend in one direction throughout all of 2013."  


Tap into the most comprehensive analysis of the long-term trend changes underway in the world's leading commodity markets with a risk-free subscription to Futures Junctures Service.


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