Are Wheat Futures Nearing a Bottom?
Wheat futures are higher in today's trade but have been under an enormous amount of pressure since marking a double top back on July 25th. In those following 25 trading sessions wheat fell as much as $1.78 with very few attempts at a relief rally in-between.
Despite the persistent selling pressure, the RSI (relative strength index) never dipped below 30 on the daily chart, which is the line in the sand that most technicians use when referencing “oversold”.
During that time we’ve seen the Managed Money (Funds) net short position grow from 40,332 futures and options contracts to 70,921 futures and options contracts (as of 8.22.23).
It appears that seasonality has outweighed concerns over global production and potential logistical issues. This years price action aligns pretty closely with what we’ve seen on the 10, 15, and 20 year average price charts.
Those seasonal averages suggest that a seasonal low wouldn’t come into play until the first week of September. Looking at a more recent 5-year seasonal average price chart, we see that the wheat market has been fishing for a bottom and consolidating a week or two earlier.
What does it all mean?
I’ve always been a big believer that the bottom is a process and not necessarily a point. With that in mind, that process could be in the process of beginning. A close back above previous support from 608-612 could confirm that bias and encourage further buying via (Fund) short covering or “bargain buyers”. The next upside objective above that pocket would be 641-646.
Check out CME Group real-time data plans available on TradingView here: tradingview.com/cme/
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Despite the persistent selling pressure, the RSI (relative strength index) never dipped below 30 on the daily chart, which is the line in the sand that most technicians use when referencing “oversold”.
During that time we’ve seen the Managed Money (Funds) net short position grow from 40,332 futures and options contracts to 70,921 futures and options contracts (as of 8.22.23).
It appears that seasonality has outweighed concerns over global production and potential logistical issues. This years price action aligns pretty closely with what we’ve seen on the 10, 15, and 20 year average price charts.
Those seasonal averages suggest that a seasonal low wouldn’t come into play until the first week of September. Looking at a more recent 5-year seasonal average price chart, we see that the wheat market has been fishing for a bottom and consolidating a week or two earlier.
What does it all mean?
I’ve always been a big believer that the bottom is a process and not necessarily a point. With that in mind, that process could be in the process of beginning. A close back above previous support from 608-612 could confirm that bias and encourage further buying via (Fund) short covering or “bargain buyers”. The next upside objective above that pocket would be 641-646.
Check out CME Group real-time data plans available on TradingView here: tradingview.com/cme/
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
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