Chicago Board of Trade wheat futures rallied a 'big'* 2% on Monday, its third consecutive rally. Wheat Futures have been in a steady downtrend for the last two months, dropping from a record high of $12.72 per bushel in March to Monday's close of $7.91.
Wheat recorded a 'fake rally' on Friday, where the close was higher than previous day's close, but was lower than the day's opening price. This pattern corresponds to a solid green candle in our bar charts.
Monday's 'big' gain pushed Wheat Futures to cross above its five- and 10-day moving averages. Despite the recent bullishness, history suggests that the downtrend will continue for at least another month.
* One-day percentage gain is more than one standard deviation stronger than the average one-day percentage change measured over the last 30 trading days.
Q: How has CBOT wheat performed in the past when, after recording a 'fake rally' the day before, it rallies 'big' to cross above its 10-day moving average during the second quarter?
A: According to the seven previous occurrences of this event, EventEdge indicates that wheat has shown a very strong bearish edge that peaks 22 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Monday, May 19, 2008) is Thursday, June 19, 2008.
CBOT wheat declines in 100% of the cases (7 of 7) by an average of 7.5% relative to the close on the event date. Which, based on the close on the event date ($7.91), provides a target price of $7.315.
To view this idea in our EventEdge® analysis tool click here.
Note that another bearish idea on Wheat Futures was just published the day before. Click the link below to view it.
Ronish Patel is an analyst with MarketHistory.com.
Related Ideas:
Wheat - Dead Cat Bounce? - May 19, 2008
