Technically Speaking
Darin Newsom DTN Senior Analyst

Monday 01/06/14

Chi Wheat's Short-Term Bullish Signals

Believe it or not, the Chicago wheat market could be turning bullish short-term and it has nothing to do with the "polar vortex" or possible winter kill. No, the budding uptrend is all about short-term technical signals suggesting the nearby March contract has established a low, for now, and could look to rally.

Source: DTN ProphetX

Take a look at the contract's daily chart. Notice that daily stochastics (bottom study) posted a bullish crossover, the faster moving blue line crossing above the slower moving red line with both below the oversold level of 20%, last Friday (January 3). This sets the stage for the futures contract to start building bullish momentum, with initial resistance pegged at the 20-day moving average near $6.18 1/2 (thick red line, top chart).

Beyond that is the normal retracement targets set by the previous downtrend from $7.20 1/2 through last Thursday's low of $5.95 1/2. The 33% retracement level comes in near $6.37, with the 50% retracement level pegged at $6.58. It will take some doing for the March Chicago contract to move that far, but support could come from the commercial side of the wheat market. Recently, the carry in the March to May futures spread (not shown) has been weakening indicating a more bullish short-term outlook toward supply and demand.

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Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

Posted at 8:36AM CST 01/06/14 by Darin Newsom
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