$8.60 has been a price level to watch lately in the July ’13 wheat contract. This month the July contract has traded up to or slightly above $8.60 in six (6) sessions this month. After settling at $8.61 on Tuesday and Wednesday this week, Thursday’s trade resulted in a technical chart formation called a “Key Reversal”.
These formations can be very reliable in signaling a trend change in markets. Yesterday’s formation is what’s considered to be a reversal “down”. The graphic below points out three such reversals in the July contract that have occurred since mid-July this year. In all cases, prices traded lower for the following 3 to 4 trading sessions.
The graphic below also illustrates the use of a “support” trend line. It indicates that price support may be found at the $8.40 level. This will be a critical price point to watch for indications of price direction. If the $8.40 price level fails as support, previous lows at $8.20 and $7.80 may come into play as future price objectives.
You can access the CME July 2013 Wheat chart at this link:
Some key fundamental factors to follow in the wheat market are:
- Potential limits on Russian wheat exports.
- Australian drought conditions (as well as U.S. High Plains and Delta).
- U.S. wheat export prices relative to the Black Sea region (U.S. prices currently $30/MT higher).
- Future direction of Corn prices (compare the price charts for corn and wheat).