Wheat Heads to 5-Month Low on Moving Average: Technical Analysis

Wheat futures, already heading for their biggest monthly decline in more than a year, may extend decline to a five-month low, according to technical analysis by Dan Hofstad, a risk management consultant at INTL FCStone.

The contract for March delivery on the Chicago Board of Trade slipped below its 200-day moving average for four straight sessions to close yesterday at $8.1125 a bushel. A drop below $8 will send prices slumping over two or three days to $7.65 a bushel, the lowest since July 2, as hedge funds and other large speculators liquidate bullish bets that already are the lowest since June, Hofstad said in an e-mail from London.

Prices that reached a four-year high in July, during a U.S. drought, have tumbled 6.1 percent this month, heading for the biggest drop since September 2011. The U.S. Department of Agriculture said Dec. 11 that world stockpiles as of May 31 will total 176.95 million metric tons, more than the 173.61 million forecast in a Bloomberg survey.

“Wheat broke the 200-day moving average, which was major support, now the only support below us is $8, which is a psychological level,” Hofstad said. “Improving crop and weather for winter wheat in Ukraine and Russia, and weaker cash markets in the U.S.” have led to the lower prices, he said.

Wheat futures still are up 24 percent this year, the most of 24 commodities tracked by the Standard & Poor’s GSCI Spot Index, after drought curbed production in Russia, Ukraine, Australia and the U.S., the world’s largest exporter.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.

To contact the reporter on this story: Tony C. Dreibus in Chicago at tdreibus@bloomberg.net

To contact the editor responsible for this story: Steve Stroth at sstroth@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.