Here is a chart that I think is worth bringing up simply to show that trendlines matter. They matter big time. This is a weekly bar chart of Wheat going back to the lows in early 2005. Prices were literally crashing in December and into January. But then out of no where, we got a killer rally.
When prices come down to significant levels like this, I think it’s worth paying attention to. But we can’t just buy something blindly. What’s going on in the short-term? In this case, prices were simultaneously putting in false breakdowns and bullish momentum divergences on the daily chart in early February:
We’re now back above the September and November lows. This level can now be used to manage risk giving us a low risk entry if you missed the initial move last month. We only want to be long this space above the September lows. Below that and things start to get messy. We don’t like messy, we like them clean.
Target-wise, I think based on what we’re seeing across the commodities space, there’s a lot of upside. The October highs above 700 are clearly the first level of supply. But I would not be surprised to see 900 based on the multiple failed breakdowns and momentum reversals. I also really like the Softs as a group.
*Note: This chart was first mentioned back in January when prices originally hit this 9 year uptrend line. To get on the distribution list for future charts & commentary REGISTER HERE.
Tags: $ZW_F $WEAT $YW_F