Discussion in 'Commodity Futures' started by Spectre2007, May 10, 2007.
I don't trade wheat but I'd like to.
Based on my view of the 1 year chart, I think wheat will hit a cycle low soon (the middle of this month, May 2007) and go up to approach previous highs over a few week period at a minimum. I don't think it will go down to the trend line you've drawn as the cycle low. It looks to me like we will stop before that.
Price action of wheat seems to signal continous selling into upside spikes. the selling subsides as we get further below 500. The market 'trains' the participants to give them the impression its headed down. As more shorts are placed, then on a given day you will see rapid short covering rally.
Thats why the wheat market is dangerous. Ultimately it will head higher, but day to day action is down. But one session can wipe out the gain on the sell side progression. Looking what happened Friday. One day can wipe out couple weeks price action. And the novices, can be caught short as the market spikes up consecutive days.
I don't think the wheat market is dangerous per se. It's just that wheat prices are currently at a high level, which is why it is more volatile.
This applies to any market. When it is trading actively at a high level, it tends to be more volatile.
My take on the wheat market (Jul 07 contract) is for a decline to set in until July ?
=) behaving as it should.
gosh ... what a move !
too bad I do not play the grains
except when eating wheaties or tofu !
yeah nice moves =). years of pattern recognition.
currently long kc over chicago wheat and expect kc to be worth somewhere in between 10-20 cents over chicago. will look to get long minn over chicago in the future.
explain the trade. I don't spread/or arb grains.
As you probably know there are 3 main types of wheat, hard red spring (Minn) hard red winter (KC) soft red winter (chi). The main difference in the wheat is the protein content. And basically the more protein the more the wheat is worth. So with hard red spring having the most protein content on average the price is higher than the other two and with soft red winter having the least amount of protein it is usually the cheapest. Now this is as a rule and does not always apply just look at the market now. Watching the different wheat crops is extremely important. Like right now the hard red spring is off to a fairly nice start while the soft and hard red winter crops are in extremely poor condition. But with the recent start of harvest in the chicago crop the market should start to stall hear as basis is weakening. While the kc crop is still getting lots of rain and stalling harvest as well as killing yeilds and promoting diseases. With worries about dry drought weather coming into the corn belt and northern states corn is shooting through the roof and I expect the same to start to happen with the minneapolis wheat gaining over the chicago.
Hope this helps you out.