Canada Markets

March HRS Trying to Bottom

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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Since printing a bullish outside-day trading bar on Nov. 25, March HRS has reached an increasing high in each of the past three sessions to reach a seven-day high. The first study shows the March/May spread narrowing 2 cents since Nov. 18. The middle study shows noncommercial traders increasing their bearish net-short position over three consecutive weeks. (DTN ProphetX chart)

March spring wheat gained 3 3/4 cents on Tuesday to close at $5.13 1/2 per bushel on Tuesday, its highest close in eight sessions, while diverging from the losses realized in both soft red winter wheat and hard red winter wheat trade on Tuesday.

Both SRW wheat and HRW futures ended lower for a second day on Tuesday, after Friday's high in the most active SRW contract reached the highest level in four months. Futures spreads for March winter wheat contracts are steady to weaker, signaling a weakening resolve on the part of commercial traders. Russia was the winner of Tuesday's entire Egyptian tender, a move that has weighed on the markets of competing suppliers.

The March HRS daily chart may indicate a slow rounded-bottoming pattern, reaching an increasing high in each of the past three sessions and a higher low seen over the past two sessions. While not shown, the volume study may not support this view, with daily volume on the March contract falling for five-consecutive days. A bottoming pattern would typically be accompanied by higher volume as price climbs.

The lower study on the attached chart shows a supportive crossing of the stochastic momentum indicators on Nov. 22, although the climb from oversold territory on the chart is a gradual one.

The first study shows a less-bearish approach on the part of commercial traders, with the March/May spread narrowing 2 cents since Nov. 18 to minus 9 cents.

The histogram seen in the middle study points to the bearish net-short position held by noncommercial traders as of Nov. 26 increasing for the third consecutive week. Given a net-short position of 14,645 contracts as of Nov. 26, this is the most bearish position held since September, when an all-time record net-short position of 18,673 contracts was reported as of Sept. 10.

In addition, the net-short position grew by 6,405 contracts or by 77.7%, which is the largest week-over-week increase ever reported for a net-short position. While a growing bearish position, this could actually be viewed as potentially bullish for the market, as a sudden shift in sentiment could lead to short-covering that can propel markets higher.

Should prices continue to move higher, the first level of resistance is found at the 20-day moving average of $5.21 3/4 per bushel, while the 33% retracement of the move from the October high to November low is calculated at $5.27 1/2 per bushel, representing the next upside challenge.


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