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    Technical Analysis #C-WHEAT : 2016-03-18

    Drought in US plains may support wheat

    Wheat prices were rising recently on cold weather forecast which could damage crops in US western wheat areas. Dry weather conditions expected in coming weeks in US plains may provide additional support for wheat. Will the wheat price continue upward correction following the forecasts?

    Wheat prices had been rising recently on forecasts of freezing weather across the US plains by the end of this week. While temperatures are still expected to fall below freezing level, the revised forecasts indicate cold weather will not cause a significant damage in western wheat areas. At the same time a farmer sowing intentions survey by Allendale, Illinois trader, showed total wheat plantings at 51.77m acres, a decline year-over-year. The US Department of Agriculture planting survey, which will provide actual data for US wheat crop projections, is due at the end of this month. MDA Weather Services forecasts the southern US plains should stay drier than normal through June, potentially stressing the region's hard red winter wheat crop and providing support for wheat. And US Drought Monitor showed that one-third of Oklahoma was abnormally dry as of March 8, up from 21% a week earlier and dryness expanded last week in Kansas, Texas and Colorado as well. MDA Weather Services expects dry weather in Plains will likely be one of the more significant issues in coming weeks.

    WHEAT price

    On the daily timeframe WHEAT:D1 has been correcting upward after hitting the lowest level since July 2010 at the begging of March. The price has breached the resistance line and fallen back to it, which acts now as a support line. The Donchian channel is tilted upward. The Parabolic indicator gives a sell signal. The RSI oscillator is near the 50 level and edging higher. The MACD indicator is above the signal line, the signal line has crossed the zero level and is edging up, which is a bullish signal. We expect the bullish momentum will continue after the price bounces off the support line, breaches and closes above the upper Donchian channel at 480.5. It can be used as an entry point for a pending order to buy. The stop loss can be placed below the support line and lower Parabolic signal at 463.7. After placing the pending order the stop loss is to be moved following Parabolic signals. Thus, we are changing the profit/loss ratio to the breakeven point. If the price meets the stop loss level at 463.7 without reaching the order, we recommend cancelling the position: the market sustains internal changes which were not taken into account.

     

    Position Buy
    Buy stop above 480.5
    Stop loss below 463.7

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