Technical Analysis #C-WHEAT : 2019-08-29

[IFC Markets]

Higher production and weak exports bearish for wheat
US wheat production estimate was increased while export inspections slipped. Will the wheat prices continue declining?

The US Department of Agriculture reported a 60-million-bushel revision upward of 2019/20 all-wheat production estimate in its monthly Wheat Outlook released August 14. Based on that expansion of projected wheat production USDA lowered season-average farm price (SAFP) forecast for 2019/20 20 cents per bushel on lower wheat price expectations for the remainder of the market year. At the same time it upgraded US wheat export prospects citing lower wheat prices as opportunity to expand U.S. sales in the new marketing year. However last week wheat export inspections came at 18.1 million bushels, lower than the prior week’s 20.8 million bushels. Weak demand and higher supply estimates are bearish for wheat.

On the 4-hour timeframe the WHEAT: H4 is testing the resistance line.

• The Parabolic indicator gives a sell signal.
• The Donchian channel indicates no trend yet: it is flat.
• The MACD indicator gives a bearish signal: it is above the signal line and the gap is narrowing.
  
• The RSI oscillator has levelled off and is not in overbought zone yet.

We believe the bearish momentum will continue after the price breaches below the lower boundary of Donchian channel at 468. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the upper Donchian boundary at 478.5. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (478.5) without reaching the order (468), we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary


Order Sell
Sell stop Below 468
Stop loss Above 478.5