Has Wheat topped out?
The Cbot Wheat has been showing dramatic price increases since December 2005, with the prices rocketing from April this year. But now there are signs that the prices have hit the top and an actual short opportunity has emerged with a head and shoulder formation materialising in the last two weeks.
The price of the Wheat contract has not been higher since 1983 and when looking at the Slow Stochastic (SSTO) on the monthly chart, a state of over bought can be seen. The Daily chart shows some easing of on the selling pressure and as such, the prices could make an upward movement next week. But from a long term point of view, a continuing increase of prices are unlikely. Any bullish tendency in the price should be considered a short term move.
Seasonally, the price of Wheat has shown it self to be lower in November, than the previous months and that only helps the price decrease. The price drop could be close to the August price of around 710, which is close to a 50% retracement,
or even all the way down to the April price of around 453.
Any price lower than that can be considered unlikely for the moment as prices would then have to break a supporting area that was formed with tops in 2002 and 2004 as well as the end of the April retracement.
