Spring Wheat Signals a Potential Reversal
March spring wheat settled 13 3/4 cents lower this session at $9.06 1/2 per bushel (bu), its fourth lower close in five sessions.
The previous week's move in spring wheat futures for March delivery saw price reach a high of $9.65/bu, close to the resistance at the 50% retracement of the move from the November high to January low, calculated at $9.69 1/4/bu, as well as the contract's 100-day moving average at $9.69 1/2/bu.
During the past five sessions, trade has failed at the contract's downward-sloping 20-day moving average twice, including today's failed attempt to move higher.
Today's trade resulted in a bearish outside bar on the daily chart, with trade moving above Friday's high, only to reach an eight-day low and close lower on the session.
Monday's low reached $8.95 1/2/bu, although the close found support at the $9/bu psychological support. Today's low came close to a test of the contract's 200-day moving average, calculated at $8.92 1/4/bu.
In addition to the contract's 200-day moving average, potential support also lies at $8.81 3/4/bu, the 38.2% retracement of the move from the contract low to the contract high reached in November, calculated at $8.81 3/4/bu. The January low of $8.72 1/4 may also provide support, while a breach of these levels could result in a slide to the 50% retracement level at $8.24 3/4/bu.
The second study shows the noncommercial net-long position in spring wheat futures falling for the 10th time in 12 weeks as of Jan. 25, despite the current concern of war between two of the world's major exporters. It is important to note that the size of this position fell by only five contracts in the most recent week, although the size of this position has fallen by a significant 70.3% during the past 12 weeks, while at 8,757 contracts, is the smallest bullish position held since the week ending April 6, 2021.
Despite the long liquidation that likely led to today's weakness, the lines on the first study shows spreads strengthening (March/May and May/July spreads) on Jan. 31, which may signal a bullish response on the part of the commercial trade on Monday that bears watching.
Cliff Jamieson can be reached at email@example.com
Follow him on Twitter @Cliff Jamieson
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