Just days ago we looked at the December spring wheat chart that was testing support from a trendline drawn from an April low, which also acted as the lower limit of a triangle consolidation pattern formed over this period. At the time, old crop was also testing similar support. As seen on the attached chart, trade on Monday and Tuesday tested the upward-sloping support line close to the $6/bushel level.
Friday's trade saw a bullish breakout from this same pattern, breaching resistance at $6.22 1/2 given a 14 1/4-cent move higher to end at $6.29/bushel. This move also saw a breach of the contract's 100-day moving average at $6.21/bu., while moving above the 67% retracement of the move from the $6.43 1/2 April 10 high to the $5.91 1/4/bu. April 24 low, calculated at $6.26 1/4/bu. This could clear a path for a move to a test of the April high of $6.43 1/2/bu. Also a bullish signal, the weekly chart (not shown) points to a bullish outside week realized in this week's trade, trading both higher and lower than last week's range while ending 24 cents higher overall.
A further move higher next week could face resistance at a recent weekly high at $6.30 3/4/bu., with today's high falling just short of testing this level. In addition, the contract's 200-day moving average at $6.34 1/4/bu. could present a further challenge given a further move higher.
Technical analysis theory presents the ability to measure the potential move higher from the point where the breakout took place by measuring the vertical distance at the widest part of the triangle pattern, while adding this distance to the point of breakout. In this particular case, the vertical distance of the pattern on April 3 is 66 1/2 cents, so this amount added to the breakout at $6.22 1/2 /bu. would suggest a target of $6.89/bu. Only time will tell.
Unlike the HRW and SRW trade on Friday, where larger moves on Friday showed signs of speculative buying interest, HRS spreads strengthened (weakening carry) on Friday, pointing to a likely combination of commercial and noncommercial buying in spring wheat this session that could help sustain this move.
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