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ZW1! trade ideas

Going With The Herd - Part 5/5I follow a technomental analytic approach to the commodities markets in a quest to determine the path of least resistance of prices. Each piece of a market’s structure provides a clue. When assembled, a picture tends to emerge, increasing the odds of success for long or short positions. The last in the series- We looked at the other components of market structure Fundamentals versus technicals The wisdom of the crowd Trend following indicators establish support and resistance levels The trend is your greatest friend in markets- Prices tend to rise or fall to unforeseen levels that defy logic Market structure deals with each commodity’s supply and demand fundamentals. Each market has idiosyncratic characteristics as production locations are in areas where the earth’s crust is rich in reserves or the climate supports crop growth. Consumption is ubiquitous as people worldwide depend on raw materials to power their lives, provide shelter and nutrition. Fundamentals are a substantial part of the analytical equation, but crowd behavior is equally important. The saying, “the trend is your friend,” is critical as when buyers are more aggressive, prices rise, and when sellers dominate, they decline. Therefore, technical analysis is a crucial tool that enhances the clarity of a picture created by the various market structure pieces. The last in the series- We looked at the other components of market structure In past articles, we looked at how term structure or the price differentials between delivery periods can offer clues about the supply and demand equation in commodity markets. We examined processing, quality, location, and substitution spreads which provide more insight into the path of least resistance of prices. The market structure components are puzzle pieces dealing with fundamentals. Many variables can push commodity prices higher or lower. The spreads and differentials that determine the overall market structure are a microeconomic approach to analysis. While they provide critical information, it is incomplete without taking the technical state of a market into account. Market structure deals with endogenous factors on the microeconomic side. Technical analysis tends to incorporate the market’s interpretation of macroeconomic factors. Fundamentals versus technicals Fundamental and technical analysis are not mutually exclusive; they can be complementary. In commodity markets, as in all markets, there are cycles. Understanding the history of cyclical behavior can help predict the future. Fortunately, you do not have to pour over thousands of pages of prices and data. All the data required for technical analysis are contained in one picture—a price chart. Fundamental analysis examines numerous aspects of an individual commodity market, while technical analysis studies past and current price action in futures contracts. The wisdom of the crowd In his 2004 book, The Wisdom of Crowds, author James Surowiecki explained “why the many are smarter than the few and how collective wisdom shapes business, economies, societies and nations” through a series of case studies. The book applies to the commodity markets as a price chart is a track record of collective wisdom. Prices move higher when buyers are more aggressive than sellers. They fall when sellers dominate buyers. Trend following indicators establish support and resistance levels Many technical indicators and price patterns reflect the crowd’s wisdom. Support levels are below the current price. They are levels where technical analysts believe that buyers will outnumber sellers. Resistance levels are above the current price. They are levels where technicians believe sellers will outnumber buyers. These beliefs often lead to a self-fulfilling prophecy as technical analysts sell near resistance and buy near support. Bullish or bearish trends do not last forever as markets rarely move in straight lines. Short-term traders watch very short-term, often intraday, charts. Longer-term technical traders and investors watch daily, weekly, monthly, or longer-term charts. Price momentum and trend strength are two critical components of technical analysis. A stochastic oscillator quantifies the momentum of a price rise or decline. They compare closing prices for a stated period with price ranges over time. The theory behind stochastics is prices tend to close near the highs in rising markets and the lows in falling markets. A reading below 20 indicates an oversold condition, while a reading above 80 points to an overbought condition. The daily CBOT wheat chart shows that overbought conditions lead to price corrections while oversold conditions lead to rallies. However, a market can remain in overbought or oversold territory for extended periods. When the stochastic reaches an overbought or oversold condition, the price action tends to run out of upside or downside steam, leading to a reversal. The relative strength indicator compares recent gains and losses in a market to establish overbought or oversold conditions. An RSI below 30 indicates an oversold condition, while a reading over the 70 level indicates that a market is in overbought territory. The daily chart of NYMEX crude oil futures shows the decline in the RSI to below 30 in late August 2021 led to a reversal and price rally. While the indicator remained above the 70 level from late September through late October, it eventually ran out of upside steam, leading to a price correction in November. On November 26, 2021, crude oil experienced the most significant decline since April 2020. The RSI fell to an oversold condition. We will find out over the coming days and weeks if the decline leads to a bottom with the technical metric in oversold territory. These technical indicators reflect price action only. They ignore all of the noise that can lead to emotional impulses. Technicians use stochastics, Bollinger bands (which highlight support and resistance levels), RSI, and many other technical tools, for any time frame ranging from minute-to-minute to very long-term horizons. Technical analysis is far from perfect, but it adds another dimension and creates another puzzle piece for determining the path of least resistance for prices in markets across all asset classes. The trend is your greatest friend in markets- Prices tend to rise or fall to unforeseen levels that defy logic The old saying that “the trend is your friend” reflects an acceptance that crowds make better decisions than individuals. Trends are an integral part of investing and trading calculus. Ignore trends at your peril as going against conventional wisdom is one of the leading causes of losses. Markets often move to extremes and remain irrational for far longer than most market participants can stay solvent. Commodities are highly volatile assets. Price variance can lead to wild swings to highs and lows. In April 2020, crude oil fell to negative $40.32 per barrel in a bearish frenzy. In May 2021, lumber futures rose to over $1700 per 1,000 board feet as bullish price action pushed the price to an irrational and unsustainable level. However, crude oil at zero was illogical, as was lumber at $1,000. Market participants that did not respect the trend suffered financial distress. Trends often carry prices to price levels on the up or downside that defy logic, reason, and rational analysis. Following and respecting trends often saves a trader or investor from catastrophic losses. We never attempt to pick a top or bottom in any market because we respect the crowd’s wisdom. However, when the trend bends, we adjust our risk positions accordingly. Finally, discipline is what defines success in markets. Remember, a professional baseball player needs a 0.300 batting average to make it into the Hall of Fame. That average means they make an out two out of every three trips to the plate. Trading and investing are similar. Many of the most successful traders call the market wrong more than half the time. However, those that approach markets with a risk-reward plan and stick to it improve their chances of success. Following trends allows profits to run. It also is self-correcting as it causes a market participant to reevaluate and close losing risk positions, before they cause severe financial damage. One of the leading causes of losses is allowing a short-term trade to become a long-term investment because the price moves contrary to a forecast. Trend following is a tool that helps to correct as it validates or refutes an original thesis. Respecting the crowd’s wisdom is an integral part of traders and investing and goes hand in hand with the puzzle pieces of a market’s structure. -- Use the link below to sign up for the Monday Night Strategy Call. You can use the other link provided below to get early access to the full articles and more for free. Trading advice given in this communication, if any, is based on information taken from trades and statistical services and other sources that we believe are reliable. The author does not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects the author’s good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice the author provides will result in profitable trades. There is risk of loss in all futures and options trading. Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal. This article does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.
Editors' picks
CBOT:ZW1!Education
by Andy_Hecht
9
WHEAT bullish until the end of the yearhello traders and investors, As you see on weekly chart, ZW had grew up rapidly when it broke the triangle up, now we are near its highest level (930) on wich zw will probably reverse down almost on the start of 2022 (jan or feb). this down trend can go untl 710$ Pay attention and keep your sens of rationality. As i always said: i don't have cristal ball predicting markets future, but i try to be more efficient and rational in my trading. Thank you and good luck
CBOT:ZW1!Long
by HASSOUNI-trading
2
wheat will have to enter it's cyclewheat has a 6month cycle, between northern and southern emisphere crop, looks like it will begin a supercycle, like all commodities. by a thecnical point of view, it's forming a H&S. wheat is a quite "dangerous" commodity to trade so i don't think it's a good idea entering before the pattern ends it's forming and starts going down from that neckline, multiple false breakouts are to expect once the price is bellow the neckline. i don't think it's a coincidence that the natural target of the pattern coincides with a round number (600), witch has been a strong resistance and support in the past.
CBOT:ZW1!Short
by warrenbuffettdemicasa
Wheat Ichimoku Analysis for November 2021Wheat is in a long-term uptrend according to Ichimoku on the daily and weekly timeframe. However, in the short/medium term the price action is forming an N wave with time cycles of approx. 77 days between major highs and 45 days between major lows. We are currently seeing some resistance and retracement around the 800 level. I would theorise the N wave will move the price downwards to the next forecast low (11 November). We can then expect the long-term trend to resume, hitting the next high around 1 December (forecast dates are +/- 1-2 days). This week I would currently look for a short opportunity on each retracement as wheat continues to move lower. However, due to the long-term uptrend, I will only short where there is a strong risk/reward, as ultimately I will be looking for a long position in November.
CBOT:ZW1!
by ichimokucorner
Wheat Futures Attempted a Breakout Last Week.Long term trend still intact. Trend continuation expected. I've been expecting a breakout from this wedge pattern for a couple weeks. Last week, the breakout did happen, but price returned to close the week back inside the wedge. I still hold that the technical pattern is extremely bullish. Fundamentals for wheat are also bullish with rising fertilizer and energy costs. One way to gain exposure to wheat futures is through the Teucrium Wheat Fund, ticker WEAT. This fund is not suitable for intraday or even shorter term swing trading due to low liquidity and large spreads. Over the long term however, the fund tracks the wheat market very well.
CBOT:ZW1!Long
by iamroot
1
Idea on US Wheat: Head & Shoulders pattern- Strong support at $6.80/bu with strong rejection candlesticks (hammer) - Bullish engulfing on this support - Rebound on the 150 Exponential Moving Average - Broke up the 100 Exponential Moving Average - Rebound on the 38.2% Fibonacci retracement level - Hidden bullish divergence on Relative Strenght Index ( RSI ) - Head & Shoulders pattern Fundamental news: - Cut of worldwide wheat production - Oversold position before monthly USDA report Objectives: Wheat could goes up to the $7.22/bu level (61.8% Fibonacci retracement level) and then goes down and confirm the Head & Shoulders pattern. The theoretical objective is $5.80/bu (support). Before this level, there is a strong support at $6.20/bu. WHAT DO YOU THINK ABOUT THIS IDEA? Feel free to share, comment and give your opinion if it is constructive ;) DISCLAIMER: This is not investment advice
CBOT:ZWZ2021
by ViclreTrade
BEARISH ON US WHEAT DEC21Bearish clues: - The general trend has been downward since mid of August 2021 - Wheat has formed a Head & Shoulders pattern (with the 61.8% Fibonacci retracement level as the neckline). This neckline was broken down yesterday with a large amount of volume - The right shoulder formed a double top - The volume indicates that sellers took the advantage: when the price dropped, the volume increased / when the price went up (formation of the right shoulder), the volume decreased - The price of wheat has broken the 100 exponential moving average Fundamental news: - Take profit by investors after last week's rise - Hurricane Ida caused the closure of several ports on the Atlantic coast, through which soybeans and corn are exported. Wheat has been dragged into the downward spiral of these commodities - StatCan released low Canadian wheat production numbers (- 34.8% compared to last year) but higher than expected - Spring wheat harvest is progressing is the United States of America (88% done VS. 71% historically at this date) - Oil price remains low Objectives: Wheat could first decrease to the $7.00/bu level (support and 50% Fibonacci retracement level). And then maybe to the $6.80/bu level (support and 38.2% Fibonacci retracement level) or will rebound on the support levels and will go up again if there are more positive news on Chinese imports and bad news on US harvest. Last objective is between $6.60/bu (theoretical objective of the Head & Shoulders pattern) and $6.50/bu (support) Feel free to share, comment and give your opinion if it is constructive ;) DISCLAIMER: This is not investment advice
CBOT:ZWZ2021Short
by ViclreTrade
2
BEARISH ON US WHEAT (SHORT-TERM)Bearish clues: - The general trend has been downward since mid of August 2021 - Wheat price has reached the resistance at $7.71/bu and the middle of the Andrews' Pitchfork - The price of wheat has already broken down a bullish channel - The price of wheat has already broken down the 50% Fibonacci retracement level of the last swing and the 78.6% Fibonacci retracement level of the last big up move - The price of wheat has broken the 20 exponential moving average Fundamental news: - The USD is more and more stronger, which is bearish for US commodities - Drop in oil prices - Take profit from investors - Better climate conditions in the North-East (wheat suffered from drought. Only 11% of spring wheat in the US are considered as good quality (spring wheat represents 25% of wheat acreages in the US => - 11% on the US wheat production YoY (Source: USDA). Objectives: Wheat could first decrease to the $7.10/bu level (support). And then maybe to the $6.90/bu level (50% Fibonacci retracement level and bottom of the Andrews' Pitchfork) or will rebound on the support level and will go up again if there are more positive news on Chinese imports and bad news on US harvest. SHORT-TERM: BEARISH MID-TERM: WAITING THE END OF THE US HARVEST Feel free to share, comment and give your opinion if it is constructive ;) DISCLAIMER: This is not investment advice
CBOT:ZW1!Short
by ViclreTrade