Noncommercial traders or investors were sellers of both spring wheat and oats on Wednesday, despite the support of the weaker U.S. dollar trade. Monday's trade saw the March oat contract move above resistance at the 67% retracement level of the move from the November high to the January low, calculated at $2.72/bu. Tuesday's trade extended this gain with a move to $2.80 1/2/bu, a 12-week high, although the move was met with resistance that resulted in a close near the lower end of the session's trading range.
Wednesday's move saw a breach of the lows reached over the past nine days. Over this period, the daily low has reached $2.65 1/2 once while a $2.66/bu low was reached on five of the nine days. Wednesday's move also saw a breach of the contract's 20-day moving average at $2.67 3/4/bu, the first time that price has traded below this line since January 4.
Potential support on the daily chart lies at $2.64 1/2/bu, the 38.2% retracement of the move from the January low to February high (red line), while a move below this level could pave the way for a further slide to $2.59 1/2/bu, the 50% retracement of the same uptrend.
The weekly chart (not shown) already points to the potential for a bearish outside reversal bar on the weekly chart this week, trading both higher and lower than last week's trading range, although this can only be confirmed with Friday's close.
The brown line on the middle study shows the nearby March/May spread ending at even money, although the ProphetX quote sheet points to a 3/4 cent carry (May trading over the March). Either way, this could be viewed as a bullish spread signaling a bullish view of fundamentals held by commercial traders given its relation to the full cost of carry between these two months. At the same time, this situation appears less bullish than seen as recent as January 24 when this spread closed at a bullish inverse of 9 1/2 cents (March closing over the May).
The lower study shows a trend of noncommercial traders reducing their net-long position since late November, from a net-long of 2,877 contracts on November 28 to the most recent 1,842 contracts, falling in seven of the past 10 weeks and close to the smallest net-long held in 15 weeks.
Any recovery and continued move higher will require a return of noncommercial buying interest.
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Cliff Jamieson can be reached at email@example.com
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