Technically Speaking

Wheat Techs Solid

This is a daily chart of November soybean futures, reaching over $10 per bushel for the first time in years. With the relative strength index (RSI) as of Sunday night at a lofty 83% and slow stochastics at a rare 98%, the momentum indicators are at the upper extreme, suggesting a correction is likely, but with no timetable. (DTN ProphetX chart)

December Chicago Wheat:

While the focus in the ag space has understandably been on corn and soybeans of late, wheat markets are turning in an impressive performance in their own right. December Chicago wheat surged through resistance last Friday with trade above the Sept. 1 highs at $5.68 1/2, reinstating the uptrend. Friday and overnight's highs around $5.78 is right at the March 31 corrective high, which was the next round of natural resistance before the January highs near $6.00. The trend is strong on all fronts with spot prices above all major moving averages and momentum indicators still pointed solidly higher. One area of caution we will note would be declining on-balance-volume (OBV) as it has generally diverged from price action on the most recent leg higher. This is a sign more market participation is occurring on down days than up over the last 20 sessions. We want to be watchful for any shorter-term failures in momentum around current levels, which would be an early sign the rally is running out of gas.

December Kansas City Wheat:

In similar fashion, Kansas City wheat has uncorked an impressive rally of late, especially the late-week trade last week. Unlike Chicago, there are no legitimate resistance candidates for Kansas City wheat between spot levels and the April highs around $5.28. The $5.28 to $5.33 level takes on added importance when one runs a Fibonacci progression of the $4.20 to $4.90 rally snapped from the $4.63 corrective low on Sept. 15. A 100% progression of that prior rally ends at $5.33 1/4. Like Chicago, momentum indicators are not yet diverging from price, a sign the move is not over. OBV is diverging from price a bit, however, which is something that needs to be monitored in the days and weeks ahead.

December Minneapolis Wheat:

The technical picture of the Minneapolis wheat market is very similar to Kansas City, although Minneapolis has many more resistance candidates, the next 50 cents above the market than Kansas City does. Friday's highs at $5.55 came right at the May/June highs and will continue to act as resistance until broken. One interesting pattern we are watching in spring wheat is a possible inverted head and shoulders formation, which could be arguing for much higher prices to come. Assuming the left shoulder around $5.22, the neckline between $5.43 to $5.49 and the right shoulder around $5.22, this could be arguing for a final price target up around $5.92 depending on how one draws the neckline. We are not advocating for a straight-line move to that level but simply some projections to keep in mind should the rally continue.

Tregg Cronin can be reached at tmcronin31@gmail.com

Follow Tregg Cronin on Twitter @5thWave_tcronin

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of commodities or commodity futures involves substantial risk and are not suitable for everyone.

Dana Mantini can be reached at Dana.Mantini@dtn.com

Follow Dana on Twitter @mantini_r

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