As US stocks have continued their march higher, the grains and softs have been orderly rolling over nearly in lockstep together for many months now…and in some cases, a few years even.
Since getting stopped out of cotton (for a modest gain), I’ve been watching the soft and grain commodity charts for signs of an intermediate bottom. I think we may have finally found one.
Wheat futures – or as Family Guy’s Stewie would say, “Whhhhhhhheat futures”, are presenting us with an interesting risk/reward scenario:
Over the past year, support for wheat has been strong just below these levels. (via BarChart.com)
As Dennis Gartman would say, I “punted” on a long position at 690 during Wednesday’s afternoon trading session. Wheat had a nice day yesterday but pulled back a bit today, closing at 697.50 for the weekend.
I like this trade because we can put a stop nearby around 660, availing us to a lot of potential upside if wheat makes the same type of run that it did last summer.
Since 2005 we have been discussing the favorable supply and demand fundamentals of agriculture, so we will glide over in this post and be content to follow the tape.