Technical Analysis #C-WHEAT : 2018-01-18

Smaller drop in sowings bearish for wheat prices

WASDE January 12 report’s estimates for US wheat sowing drop was smaller than expected while inventory forecast bigger. Will the wheat price continue falling?

The Department of Agriculture WASDE monthly report’s estimate for US winter sowings 88,000 acres decline to 109-year low 32.61m acres was smaller than expected. At the same time, wheat stocks at 1.87bn bushels as of December 1 were bigger than expected. The smaller decline in sowings and higher wheat stocks are bearish for wheat prices.

 

On the daily timeframe, WHEAT: D1 is trading with the negative bias after retracing higher following the decline from twenty four-month high in mid-June. The price has fallen below the 50-day moving average MA(50).

• The Donchian channel gives a neutral signal: it is flat.
• The Parabolic indicator has formed a sell signal.
• The MACD indicator gives a bearish signal: it is above the signal line and the gap is narrowing.
• The stochastic oscillator is rising from the oversold zone.

We expect the bearish momentum will continue after the price closes below the lower Donchian bound at 419.6. A price point below that level can be used as an entry point for a pending order to sell. The stop loss can be placed above the last fractal high at 441.3. 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 (441.3) without reaching the order (419.6), we recommend cancelling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary