Market Strategy

Dissector: Wheat moving sideways with negative bias

Yoganand D | Updated on October 13, 2012 Published on October 13, 2012


Corn futures on the Chicago Mercantile Exchange (CME) is considered the benchmark for tracking the coarse grain. It fell almost three per cent on Friday, giving away most of Thursday’s gains to settle at 750.7 cents a bushel.

The long-term trend has been up for corn since it took base at 300 cents in September 2009. It is trading well above its 200-day moving average. Long-term trend will stay up for the commodity as long as it trades above 500 cents. Key long-term support is pegged at 600 cents. A strong rally above important resistance at 800 cents will take corn prices higher to the psychological resistance at 900 cents.

Corn has been on a medium-term uptrend from its early June low at around 551 cents. This trend will remain in place as long as corn trades above its key support band between 660 and 670 cents. An emphatic decline below this band will mar its medium-term uptrend and pave the way for a decline to 620 cents in the medium-term.

Following a volatile week, corn is currently testing key resistance at 775 cents. Inability to move above this level will pull the commodity price down to 730 cents and then to 700 cents in the near-term. But a strong breakthrough of 775 cents will take corn higher to 810 cents and 834 cent. Next resistance is positioned at 850 cents.

Breaches key marks

On Friday, wheat fell 3.3 per cent breaching its 21- and 50-day moving averages, to close at 856.7 cents. It has been trending upwards since bottoming out at its June 2010 trough at 425 cents. Wheat’s long-term trend remains up as long as it trades above its key support range between 570 and 590 cents.

Strong jump above its significant long-term resistance at 950 cents will take wheat higher to 1,000 cents. Subsequent resistances are at 1,105 cents and 1,200 cents.

Medium-term trend too is up for wheat. However, in the short-term, it has been consolidating sideways with negative bias in the band between 840 and 950 cents. An emphatic breakthrough of 840 cents will drag wheat down to 800 cents and to 750 cents in the medium-term.

A decisive fall below 750 cents will negate its medium-term uptrend and pull the commodity down to 700 cents. A strong rally above 950 cents is required to reinforce bullish momentum and push the commodity higher to 1,000 cents.

>yoganand.d@thehindu.co.in

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