Technical Analysis #C-WHEAT 04-10-2016 by IFC Markets
USDA cut wheat crop forecast
USDA cut forecast of summer wheat crops for 2016/17 as well as corn crops for September 1, 2016. As a result, corn prices edged up. Will wheat follow its steps?
In its quarterly grains report USDA cut significantly the summer crop forecast to 534mln bushels from 571mln bushels in previous report. Market participants expected the downgrade only to 570mln. Wheat stocks in US amount to 2.527bn bushels which is above the average forecast of 2.402bn. Corn stocks fell short of expectations (1.754bn bushels) being 1.738bn. The same story was with soybeans stocks which were below market expectations. Meanwhile, US production of wheat of all grades is estimated at 2.31bn bushels in season 2016/17.This is a bit below the expected 2.323bn.
On the daily chart Wheat: D1 is being near the support of the rising channel. Prices may rise in case of downgraded crops forecasts in US and other countries. As a rule, wheat, corn and soy show similar price changes.
- Parabolic is giving bearish signals.
- The Bollinger bands have contracted a lot which means extremely low volatility.
- RSI is below 50, no divergence.
- MACD gives bullish signals.
The bullish momentum may develop in case the wheat surpasses the two last fractal highs, Parabolic signal and upper Bollinger band at 417. This level may serve the point of entry. The initial stop-loss may be placed below the 10-year low hit late in previous August at 386. Having opened the pending order we shall move the stop 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 386 without reaching the order at 417, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Technical analysis summary
|Buy stop||above 417|
|Stop loss||below 386|
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