May Kansas City Wheat:
For most of 2021, Kansas City wheat has been in a consolidative pattern, coiling in anticipation of a breakout. Depending on how one draws their trend lines, the pattern could be called either a pennant or flag formation, both of which would suggest an upside breakout would be likely. With trade from Feb. 22-24, this is precisely what looked to be occurring with a fresh round of contract highs. However, since those contract highs were set, Kansas City wheat has traded lower, raising the question of whether the breakout was simply a bull trap. With trade on Friday, the May contract fell below the 5-, 10- and 20-day moving averages while the 50-day sits down at $6.19. Trends remain up for now, but early week trade will be crucial for determining if the breakout was indeed a false signal or whether a retest of last week's highs is possible. One other technical note of interest, the highs from Jan. 15 and Feb. 24 have now helped form an ascending triangle pattern, which would also suggest a resumption of the uptrend after a period of consolidation.
May Chicago Wheat:
Chicago wheat had a similar technical outlook as Kansas City, although the former failed to set new contract highs last week. Importantly, Chicago wheat did manage to push 20-day on balance volume (OBV) back into positive territory on the most recent rally, a sign bulls have wrestled control back from bears. Fortunately, Chicago wheat has solid trend-line support dating back to December and even August. The trend-line support stemming from December and February lows lines up quite nicely with the 50-day moving average at $6.46. We would expect this area to hold on any further setback. At the very least, the market has identified some rather objective risk parameters from which to gauge bullish exposure. To the downside, we would look to the $6.46 level while on the upside the high at $6.88 1/2 is arguably the most important technical level in Chicago wheat. The same ascending triangle pattern present in Kansas City wheat could be drawn in Chicago, which argues for a resumption of the uptrend in the days and weeks ahead.
May Minneapolis Wheat:
Spring wheat futures carry a near identical technical picture as Chicago wheat, making the analysis applicable for both markets. Interestingly, OBV has not pushed into positive territory in Minneapolis or Kansas City the way it has in Chicago, which is a bearish technical factor, considering the failed breakout in Kansas City so far. Minneapolis wheat has trend-line support at $6.35 stemming from the lows in January and February. The 50-day moving average sits down at $6.23 with the corrective lows in January and February expected to offer support on any further setback attempts. Like winter wheat, spring wheat futures simply need to reclaim the highs posted last week at $6.58 3/4 to reinstate uptrends and resume outright bullish exposure. Until or unless the May contract can reclaim that level, a short-term negative bias must be maintained. From a longer-term perspective, trends remain up and the technical patterns look supportive.
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.
Tregg Cronin can be reached at firstname.lastname@example.org
Follow Tregg Cronin on Twitter @5thWave_tcronin
(c) Copyright 2021 DTN, LLC. All rights reserved.