Wheat futures traded on the Chicago Mercantile Exchange (CME) is considered the benchmark for tracking wheat prices in general. It was volatile last week, declining to an intra-week low of 692.7 cents a bushel before recovering its initial loss and finishing the week on an almost flat note at 713.2 cents. Wheat futures tumbled 9 per cent in February this year.
Ever since peaking out at its July 2012 peak of 947.2 cents, the commodity has been in an intermediate-term downtrend. While trending down, wheat futures broke through a key support at 850 and 750 cents in early December 2012 and early February.
In early January, the commodity conclusively breached its long-term moving average line (200-day). Subsequently, this average line acted as key resistance. Wheat futures is trading well below its 50- and 200-day moving averages.
Last week, wheat futures found base at around 700 cents and is currently testing this support. An emphatic breakthrough of this support will drag the commodity lower to 650 cents which is the next significant support level. Important support below 650 cents is positioned at 600 cents.
The daily as well as weekly relative strength indices are featuring in the bearish zone implying bearish momentum. Similarly, both daily and weekly moving average convergence divergence indicators are hovering in the negative territory.
However, an upward reversal from the present base level can take the commodity higher to 745 cents and then to 750 cents in the short-term. Next important resistance is pegged at 790-800 cents band. But only a strong breakthrough of the key trend-deciding level at 850 cents will reverse the intermediate-term downtrend and push the commodity northwards to 900 cents. Significant resistance above 900 cents is positioned at 950 cents.
The long-term trend has been up for wheat futures since its trough formed at 425 cents in June 2010. As long as wheat futures hovers above its key long-term base zone between 570 and 600 cents, its long-term uptrend will remain in place. Conclusive up-move above 950 cents will pave the way for a rally to 1,000 cents in the long-term horizon.