Canada Markets

Spring Wheat Breaches Moving Average Resistance

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
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The March spring wheat contract closed above its 50-day moving average on Thursday for the first time since Oct. 15. The contract is approaching November highs and is poised to close higher for the third straight week. The red line in the second study points to supportive commercial buying interest, while the key to a market move could be the noncommercial net-short position shown by the blue bars of the histogram in the lower study. (DTN ProphetX chart)

The spring wheat market is likely seeing supportive buying interest from the commercial and noncommercial side of the market, with Thursday's 5 1/4-cent move higher resulting in the first close above the contract's 50-day moving average since Oct. 15. Since Aug. 24, the March contract's price has only closed above the 50-day moving average three times.

The March/May futures spread, as seen on the second study, narrowed to minus 3 1/2 cents Thursday (May trading over the March contract), the narrowest this spread has closed since April 13, a sign of commercial buying interest behind the move in prices.

A further sign of strength may originate from the noncommercial side as concerns grow over more rumours in the global trade that Russia's government will step in to limit exports, although European commentary is already pointing to a sharp decline in Russia's weekly sales in recent weeks. As seen in the blue bars of the histogram in the lower study, noncommercial traders have reduced their bearish net-short position in spring wheat in each of the past two weeks. Continued short-covering by this group could continue to be a supportive feature in the spring wheat market.

As seen on the attached chart, an area of resistance is found in the $6-per-bushel range given a further move higher. The contract's 100-day moving average is calculated at $5.98 1/2/bu. The 33% retracement of the move from the August high to the November low is found at $6.00 3/4/bu. The 38.2% retracement is found at $6.06/bu and the contract's 200-day moving average is found at $6.11 1/4/bu.


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