Article / 12 December 2012 at 10:15 GMT

Commodity momentum: Wheat at a five-month low

Ole Hansen Ole Hansen
Head of Commodity Strategy / Saxo Bank
Denmark

The price of CBOT Wheat crashed through support at USD 8.5 per bushel yesterday and thereby left behind the trading channel within which it has been trading since late July. Increase global inventories helped relieve some of the upside price pressure which has been created by reduced exports from the Black Sea region and recent reports about the poor state of US Mid West winter crop. 

Elsewhere the momentum indicator is unchanged from yesterday with only platinum, copper and soybeans holding on to positive momentum. Coffees negative momentum has slowed after finding support below 146.5 but the 46 days spent in this trend is currently the longest followed by platinums 20 days spent having positive momentum.

Momentum indicator

1y
Miguel Levy Aires Miguel Levy Aires
Hi Ole. I would like to know your opinion about Coffee. I'm leaning to buy it, in technical perspective, beacause it's been building a good base since November. But i don't know what is the current fundamentals situation. Many tks
1y
Ole Hansen Ole Hansen
Hi Miguel, coffee has been under some pressure due to abundant supplies during which time the speculative net-short position has risen to the highest level since late 2003, currently at 26,293 if you look at money managers only. This obviously leaves the contract exposed to a sharp reversal once the fundamental and/or technical picture improves. If you have the patience i suppose it makes sense to wait for a break out of the current channel to get technical signal. If thats not the case a tight stop should be applied just below the bottom of the same channel given the fact that it still points towards further weakness despite the slowing negative momentum.
1y
Ole Hansen Ole Hansen
The reason why the tight stop is required you can see on the attached. Because while we have seen the net-short increase the gross long have also increased to the highest since May 2011. These longs will have to bail or at least reduce should the downward move continue.
1y
Miguel Levy Aires Miguel Levy Aires
Many thanks for the insight! Very helpfull! Tight stop shall be... I like the divergence in the RSI, but a stop is very wise.

Disclaimer

The Saxo Bank Group provides an execution-only service and all information provided on Tradingfloor.com is solely for general information. When trading through Tradingfloor.com your contracting Saxo Bank Group entity will be the counterparty to any trading entered into by you. Tradingfloor.com does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. Saxo Bank Group will not be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available as part of the Tradingfloor.com or as a result of the use of the Tradingfloor.com. Any information which could be construed as investment research has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such should be considered as a marketing communication. Furthermore it is not subject to any prohibition on dealing ahead of the dissemination of investment research. Please read our disclaimers:
- Notification on Non-Independent Investment Research
- Full disclaimer

Show latest activity
Dismiss
Sorry, there was a problem communicating with the TradingFloor.com servers. We are working hard to solve this. Please try again later.
Oops! There was a problem communicating with the OpenAPI Portfolio service.
Oops! There was a problem communicating with the OpenAPI History service.
Oops! There was a problem communicating with the OpenAPI Reference service.
Oops! There was a problem communicating with the OpenAPI Root service.
Oops! There was a problem communicating with the OpenAPI Trading service.
Sorry, there was a problem communicating with the Financial Calender servers. We are working hard to solve this. Please try again later.
Check your inbox for a mail from us to fully activate your profile. No mail? Have us re-send your verification mail