Focus: Wheat Selloff
Wheat set a monthly high of $6.77 on the first of June. Since then, it has experienced an orderly selloff, dropping over $1.42 to close Friday at $5.325. A falling dollar and weak export demand have contributed to declining wheat prices. Demand is likely to remain weak until after Tuesday when the U.S. Department of Agriculture releases its acreage and quarterly stocks report. The 60-minute chart of wheat highlights a key feature of the Directional Movement Indicator (DMI). A DMI above 25 indicates strength. The chart shows how the –DMI (red line) crossed above the 25 level (left red arrow) at the beginning of June and remained above 25 all month (the 25 level is represented by a horizontal blue dashed line). The last test of the 25 level came last week (right red arrow), but the downtrend remained strong. For the trend to reverse, the +DMI (green) will have to cross above 25. The next strong support level is at $5.10-$5.15.
Chart Courtesy of TradeStation
Dr. Charles B. Schaap 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.
