As seen on the blue bars of the histogram on the second study of the attached chart, noncommercial traders of spring wheat have pared their bearish net-short position in spring wheat over four consecutive weeks, while holding a modest net-short position of 5,953 contracts, the smallest net-short position seen since the week of July 2.
Despite this less-bearish approach to trade by this group, the December contract has consolidated in sideways trade as traders balance the negativity of global wheat data being reported along with the late harvest seen in both the U.S. and Canada.
Since reaching a recent high of $5.59/bushel on Sept. 26, trade has formed a symmetrical triangle pattern, as seen with the upward and downward-sloping blue lines on the attached chart. Current trade is nearing the apex of the triangle, which would normally lead to a continuation of the direction seen prior to the pattern being formed, or in this case, would point to a probable break higher.
The measuring ability of this pattern would indicate that price targets are set at a distance above or below the point of breakout equal to the base of the pattern. In this case, the distance of the base is 45 cents/bushel, or the distance from the upward-sloping line to the high reached on Sept. 26.
The current support and resistance levels calculated by ProphetX is $5.35 3/4 per bushel on the lower trend line and $5.52 1/4 per bushel on the upper line, which suggests a target price of $4.90 3/4 per bushel, given a downside breakout, along with an upside target of $5.97 1/4 per bushel, given a more likely upside breakout.
Further resistance lies at $5.52 1/4 per bushel, the 61.8% retracement of the move from the June high to September low, $5.58/bu. which is the 67% retracement of the same downtrend and the contract's 200-day moving average at $5.57/bu.
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Cliff Jamieson can be reached at email@example.com
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