CBOT wheat may retest resistance at $7.37 in Q3

CBOT wheat (Wc1) may retest a resistance at $7.37 per bushel in the third quarter, after its stabilization around a support of $5.92-3/4.

The stabilization followed the completion of a five-wave cycle from $14.25-1/4. The main theme could be a constant bounce towards the peak of the wave d at $9.49-3/4 over the next few months.

The support triggered a strong bounce that extended to $7.56-3/4, a high touched in June. Three waves make up the bounce. The current wave b may end around a rising trendline which establishes a support about $6.24.

This wave is expected to be reversed by the wave c. The bullish divergence on the weekly MACD confirmed an exhaustion of the downtrend. It suggests a further bounce as well.

A break below $5.92-3/4, which seems very unlikely in the third quarter, may open the way towards $4.93-3/4.

When the bounce from the May 31 low of $5.73-1/4 is zoomed in on the daily chart, it seems to be against the downtrend from $9.49-3/4.

A retracement analysis on the trend reveals a support zone of $5.73-1/4 to $6.28, in which, the wave b is likely to complete.

Indeed, it may have ended around $6.28, the 14.6% retracement. The sharp drop from the June 26 high of $7.56-3/4 looks like a pullback towards a falling trendline.

A break above $6.62 could signal the progress of the wave c towards $7.41-1/2 to $8.11-3/4 range while a break below $6.28 may trigger a drop limited to $5.73-1/4.

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** Wang Tao is a Reuters market analyst for commodities and energy technicals. The views expressed are his own.

No information in this analysis should be considered as being business, financial or legal advice. Each reader should consult his or her own professional or other advisers for business, financial or legal advice regarding the products mentioned in the analyses.