Wheat Set to Fall 14% After Approaching Bollinger Band: Technical Analysis

Wheat may fall as much as 14 percent to $6.90 a bushel in Chicago after the grain rallied to a four- month high near the upper of two Bollinger bands, according to technical analysis by VTB Capital.

The attached chart shows wheat for March delivery advanced near its upper Bollinger band. The grain fell toward the lower band in November after prices earlier that month neared the top band, VTB analyst Andrey Kryuchenkov said. Wheat may also fall after its 14-day relative strength index rose near 70, a sign that a commodity may be overbought, he said.

“The recent breakout at the end of last week saw the market retesting the upper Bollinger band once again,” London- based Kryuchenkov said. “Provided resistance above $7.80/$8.00 holds, the market is then likely to pull back towards the end of November range around $6.90.”

Wheat is up 49 percent this year on supply disruptions in Russia, Canada and Australia, and jumped 13 percent last week on renewed concern that unusually heavy rainfall in Australia will delay the harvest and reduce grain quality. The grain for March delivery traded at $8.05 by 8:08 a.m. London time today on the Chicago Board of Trade.

The commodity’s 14-day RSI, a gauge of whether a commodity is overbought or oversold, was at 72 today. Some analysts view a level of 70 as a sign that prices may be poised to drop. Should wheat “break through” the current resistance levels, then prices may climb toward the August high of more than $8.60, he said.

Photographer: Trevor Snapp/Bloomberg

Wheat is up 49 percent this year on supply disruptions in Russia, Canada and Australia. Close

Wheat is up 49 percent this year on supply disruptions in Russia, Canada and Australia.

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Photographer: Trevor Snapp/Bloomberg

Wheat is up 49 percent this year on supply disruptions in Russia, Canada and Australia.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Bollinger bands, developed by analyst John Bollinger, are based on historical price swings. The bands narrow and widen to reflect the size of those moves, and represent possible support and resistance levels.

To contact the reporters on this story: Maria Kolesnikova in Moscow at mkolesnikova@bloomberg.net,

To contact the editor responsible for this story: Claudia Carpenter at ccarpenter@bloomberg.net.

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