Canada Markets

SRW May be Signaling More Bad News for the Wheat Market

Cliff Jamieson
By  Cliff Jamieson , Canadian Grains Analyst
Connect with Cliff:
@CliffJamieson
Dec. 16 SRW trade saw price rebound from the previous session's bearish close, while settling back above the contract's 100-day moving average. There exists some debate over what may be a recent breach of a neckline of a head-and-shoulders chart pattern that may signal a move to $6.85 1/4/bushel, also close to the September low. The brown line on the lower study represents the March/May futures spread, which is showing strength on Dec. 16. (DTN ProphetX chart)
Dec. 16 SRW trade saw price rebound from the previous session's bearish close, while settling back above the contract's 100-day moving average. There exists some debate over what may be a recent breach of a neckline of a head-and-shoulders chart pattern that may signal a move to $6.85 1/4/bushel, also close to the September low. The brown line on the lower study represents the March/May futures spread, which is showing strength on Dec. 16. (DTN ProphetX chart)

The sharp 31-cent drop seen in the Chicago soft red winter wheat contract on Dec. 15, which was accompanied by a 26 1/4-cent crop seen for hard red winter and 11 3/4-cent drop in the nearby hard red spring wheat contract has created a stir among wheat market watchers around the world as a hunt for clues that triggered or justified the move continues.

Dec. 16 trade saw spring wheat recoup the previous session's losses, while HRW and SRW clawed back a significant portion of the previous day's move.

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One debate on social media today is that the most active SRW chart may have been sending a bearish signal during the past week, with the breach of the neckline of a head and shoulders pattern on Dec. 9. As seen on the attached chart, this pattern is formed with the left shoulder on Nov. 2 at $8.18/bushel (bu), the right shoulder on Dec. 3 at $8.22 3/4/bu, and the head reached at the Nov. 24 contract high of $8.74 3/4/bu.

The measuring ability of this pattern would signal a return to the red dotted line shown at $6.85 1/4/bu, which also signals a retracement to the September low of $6.87 3/4/bu.

The Dec. 15 close was below the contract's 100-day moving average for the first time since Sept. 24, while it also breached the contract's 61.8% retracement of the move from the September low to November high. The breach of both support levels may have triggered stops that could have led to a further downside, although buying interest led to a higher close on Thursday.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow him on Twitter @Cliff Jamieson

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Dec. 16 SRW trade saw price rebound from the previous session's bearish close, while settling back above the contract's 100-day moving average. There exists some debate over what may be a recent breach of a neckline of a head-and-shoulders chart pattern that may signal a move to $6.85 1/4/bushel, also close to the September low. The brown line on the lower study represents the March/May futures spread, which is showing strength on Dec. 16. (DTN ProphetX chart) 
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