Focus: Wheat is Primed for a Reversal
It isn’t necessary to predict the direction of price in order to make money, but one certainly needs to recognize when price is changing direction. Wheat provides a good example. Wheat has been in a long decline, and it dropped to the $5.00 level during the last two weeks. It had hit that number three times in the last three years, and each time it rebounded. Wheat bounced off $5.00 in December of 2005, $5.05 in August 2006, and $5.05 in April of 2007. Last week, wheat crossed above the hourly trendline and formed a wide range bar that expanded to make a new high. It then formed a higher low above the trendline. This occurred while ADX demonstrated weakening of the downtrend and bullish divergence. Wheat is currently in a retracement pattern, but a reversal may be forming on the hourly timeframe. Depending on follow through, price may be primed to reverse on the higher timeframes (daily, weekly) as well.
Chart Courtesy of TradeStation
Dr. Charles B. Schaap transitioned from health care to wealth care in the nineties. He is the author of ADXcellence —Power Trend Strategies and Invest with Success—Big Profits for Small Investors. Dr. Schaap is a commodity futures strategist and recognized authority in technical analysis of the financial markets. His website is www.adxcellence.com.
