Wheat futures (CBT.W) rallied a 'big' 2.4% during Friday's session to close the day at $7.61'4. The rally came on a 'trend day' up pattern, where the open was in the lower 20% of the day's intra-day range while the close was in the upper 20%. This comes after CBT.W crossed below its 13-week lowest low on Thursday; sinking to an intra-day low of $7.31 per bushel. History suggests more lows are on the way.
Q: How has CBT.W performed in the past, omitting repeat occurrences within 10 trading days, when, during the second quarter, it sees a 'trend day' up pattern on day after crossing below its 13-week lowest low?
A: According to the 12 previous occurrences of this event, EventEdge indicates that CBT.W has shown a somewhat bearish edge that peaks 17 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Friday, May 30, 2008) is Tuesday, June 24, 2008.
CBT.W declines in 83% of the cases (10 of 12) by an average of 5.5% relative to the close on the event date. The average of the two rallies is 1.7%. The overall return of the 12 cases is -4.3%, which, based on the close of CBT.W on the event date ($7.61'4), provides a target price of $7.28'6.
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Ronish Patel is an analyst with MarketHistory.com.
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