In addition to chart patterns, many traders and analysts graph the moving averages of past price settlements to smooth out the choppy price patterns. Some analysts overlay a slower moving average (say, a 40 day like the green line above) with a faster one (e.g., a 9 day like the red line above) to signal changes in trend that are harder to discern from a choppy bar chart. For example, the blue price line crossed the red 9-day moving average several times in September. It did not penetrate the slower 40-day moving average (green line). If the blue line crosses through both the slower moving 9-day and the 40-day averages, as it did around May 12, the direction of the blue line could be interpreted as a more meaningful trend or a buy signal. I am not suggesting that such an indication is either meaningful or a trend, but if traders act on it as such, it may have some short term influence. And indeed it may have influenced some of the buying that took place in the three sessions between May 11 and May 15. It may also have influenced some of the selling in early June and on August 10 when the market was limit down.
Another approach is looking at a longer term moving average chart like the one below. When futures prices (in blue) cross the 200 day moving average (in red), that is typically noticed and cited by technical analysts as a meaningful price move. In the present context, we expect a lot of sell stop orders were situated around the 200 day moving average (around 71 cents). That suggests that a lot of traders were betting that prices wouldn’t fall below this level, or perhaps the psychological barrier of 70 cents. This may explain the pattern of sharply lower prices as sell stops were triggered during the week ending June 15: on Wednesday June 14 Dec’17 futures settled at 70.95 cents per pound, about 75 points lower than the 200-day moving average value of 71.70.