Since reaching the Oct. 21 high of $5.96 3/4 per bushel (bu), the March MGEX hard red spring wheat contract has traded mostly over a 40-cent range, finding support along the way at the 50% retracement of the move from the contract's August low to Oct. 21 high, calculated at $5.58 1/2/bu.
Nov. 30 trade saw this support breached, along with the contract's 20-day, 50-day and 200-day moving averages, as well as trendline support drawn from the $5.20 1/4/bu low reached on Aug. 12.
Dec. 1 trade saw the March price dip below the contract's 100-day moving average and the 61.8% retracement line, while eventually finding support at the 67% retracement at $5.45 1/2/bu. Losses over the past two days total 20 3/4 cents, while the first study shows stochastic momentum indicators entering into oversold territory that may act to slow noncommercial selling.
A breach of the 67% retracement line could result in a further slide to lows on the weekly chart at $5.36 1/4/bu, a double-bottom seen in September trade.
The histogram on the second study (blue bars) shows the noncommercial net-long position increased for the first time in four weeks in the week ending Nov. 24. Looking back, this bullish stance has been taken by the speculative trade for only the past seven weeks beginning in mid-October, while reaching the largest net-long held by this group in more than six years. This is despite bearish U.S. spring wheat data with the latest World Agricultural Supply and Demand Estimates (WASDE) reports forecasting a 48.4% stocks/use ratio for 2020-21 and record 2020-21 global stocks forecast with a 42.6% stocks/use calculated. This position remains a risk for this contract should the speculative trade lose hope of further gains.
The lower study shows the March/May spread weakening by 1/4 cent this week to minus 8 3/4 cents, while this spread has weakened in three of the past four weeks, which seems a bearish response on the part of commercial traders (red bars on the second study), who continue to hold a bearish net-short position for a seventh week.
A look at the March contract trade over the past five years, December trade for the March contract shows a monthly loss in three of the past five years. The monthly move for the March contract in the month of December has ranged from a 26 3/4-cent loss to a 46 1/2-cent gain over the past five years, while the average move over the past five years is less than 1/2 of one cent.
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