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    Technical Analysis #C-WHEAT : 2016-03-07

    Weather affects markedly the prices

    The wheat prices edged up on Friday for the 3rd time amid bad weather in the US. After the grain hit a fresh 5 ½ year low last week, its price showed the record weekly growth since December. May the wheat prices continue edging upwards?

    The main growth factor for wheat prices was the drought in the US Great Plains area which may reduce crops. The climatic agency U.S. Drought Monitor reported the 21% of Oklahoma state suffers from dry weather. The scarce rains may come only in a fortnight. Another factor for wheat prices increase is the agricultural broker Veles-Agro report on the 20% lower wheat crops in Ukraine in season 2016/17 compared to the previous season. This may happen due to the droughts. On March 9 at 18:00 CET the monthly USDA report on wheat, corn and soybeans stocks will be released which may affect grains prices. The February wheat stocks were estimated at 966mln bushels while the current consensus forecast of private analytical agencies for wheat stocks is at 975-980mln bushels.

     

    Wheat

    On the daily chart Wheat: D1 is struggling for leaving downtrend to move sideways. A couple of days ago it hit a fresh 5 ½ year low and is correcting upwards now. The Parabolic and MACD indicators have formed the signals to buy. The RSI is moving upwards having surpassed the level of 50? No divergence. The Bollinger bands have contracted a lot which means lower volatility. The bullish momentum may develop in case the personal composite instrument returns to the former sideways channel and surpasses its resistance line – which previously was the support – at 467. This level may serve the point of entry. The initial risk-limit may be placed below the Parabolic and Bollinger signals, multiyear low and the last fractal low at 442. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 442 without reaching the order at 467 we recommend cancelling the position: the market sustains internal changes which were not taken into account.

     

    Position Buy
    Buy stop above 467
    Stop loss below 442

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