Market Focus: Wheat

The Wheat Continuous Contract (@W) has been in a down trend for over a year, but recent price action may suggest a trend reversal is underway. The pace of the downtrend had initially accelerated going into 2013, when the price action transitioned from a downward sloping price channel to an even steeper one. However, the pace of the decline stabilized in the first few months of the year and the continuous contract started to form a triangle formation (go to the blog for the chart; then see the dark blue lines).

Fast forwarding to today, the diagonal triangle has finally been breached to the upside and the @W has also broken its short- to intermediate-term moving averages. The price action has now its sights on the 200-day moving average, which is just above current levels.

On a side note, notice that the Commodity Channel Index recently showed extreme overbought levels, but keep in mind that oscillators can show extreme readings in the direction of a new trend (go to the blog for the chart; then see yellow highlights). Going forward, the price action suggests that additional upside could be expected.

You can read more of this blog here.

Frederic Palmliden, CMT, senior quantitative analyst, TradeStation.