Paris Wheat May Drop 4.1% in Retracement: Technical Analysis

Paris-traded milling wheat futures for January delivery may extend a drop to 193 euros ($266) a metric ton in the next month before rebounding, according to technical analysis by farm adviser Agritel.

The level implies a 4.1 percent drop from yesterday’s close of 201.25 euros. The attached chart shows 193 euros would be a 61.8 percent retracement of the gain from a low at 184.50 euros on Sept. 17 to the Oct. 23 peak of 206.50 euros, one of the levels singled out in so-called Fibonacci analysis.

“Short-term we could look for 200, after which, say within about a month, we could seek out 193 to 195.50,” Sebastien Poncelet, a consultant at Agritel, said by phone yesterday. “If we would rebound from there, it would be a confirmation of the long-term trend.”

Wheat prices advanced in October amid concern about harvesting delays in Russia and Ukraine and potential crop damage in Argentina and Australia.

Wheat futures for January reached a low of 181.75 euros on Aug. 14 before rebounding to 194.50 euros on Aug. 27, followed by a decline to the Sept. 17 level of 184.50 euros. The subsequent higher bottoms indicate a longer-term rising trend, Poncelet said.

“The next bottom has to be higher for the upward trend to be maintained,” Poncelet said. Should January wheat rebound, the contract may climb above 206 euros within a two- to three-month period, he said.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index. Fibonacci analysis is based on the theory that prices tend to drop or rise by certain percentages after reaching a high or low.

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