Wheat Update July 2015 (D,M)
Created on Saturday, 11 July 2015 01:14
Written by Austin Galt
The wheat has price exploded off its recent lows so let’s revise the situation using the daily and monthly charts.
WHEAT DAILY CHART
I have drawn a horizontal line denoting the September 2014 low at $466.25. Price recently nudged below that level in May 2015 before reversing back up and creating a false break low at $460 in the process.
I have drawn tow Fibonacci Fan angles from the May 2014 high. The low was right around 61.8% fan angle. Price has subsequently traded above the 76.4% angle in bullish fashion. This angle had previously provided solid resistance around the December 2014 high.
The recent low was accompanied by triple bullish divergences in the RSI and Stochastic indicator while the MACD indicator also showed a bullish divergence and is now looking very bullish.
As laid out in previous analysis, I favour price trading above the December 2014 high which stands at $677. I now also favour price taking out the May 2014 high at $739.50. However, if I am wrong about this then there are a couple of levels to watch closely. What are they?
I have added a couple of Fibonacci retracement levels of the move down from May 2014 high to September 2014 low. The 76.4% level stands at $673 which is right around the December 2014 high while the 88.6% level at $707 is just above.
Personally, I favour even higher so let’s go to the monthly chart to see where some likely rally highs levels are.
WHEAT MONTHLY CHART
I showed this chart back in February 2015 and the rally has finally appeared. In that analysis, I was looking for price to find resistance and turn back down after hitting the downtrend line I have drawn connecting the March 2008 and July 2012 highs. It still may however I am starting to favour an even bigger parabolic rally that gets up to resistance from the uptrend line I have drawn from the June 2010 low.
I have added Fibonacci retracement levels for the move down from June 2012 to the recent low. Price turning down at the downtrend line would likely see the 50% level at $703 come into play. Personally, I favour price trading up to at least the 76.4% level at $832 which would mean price finding resistance from the uptrend line.
I have drawn a horizontal line denoting the May 2014 high at $739.50 and price trading above that means the parabolic rally scenario is playing out.
Price trading above the June 2012 high at $947 would likely mean the next big uptrend is taking place but that is not my expectation.
The recent price low was accompanied by triple bullish divergences on the RSI and Stochastic indicator. This often leads to a significant rise and this is the monthly chart so it’s a pretty solid indication.
The MACD indicator showed a bullish divergence and is now trending up and looking bullish.
Summing up, the expected rally is finally taking place and the only question is how parabolic does this rally trade. I favour a lot but time will be the judge.