Options Blueprint Series [Basic]: H&S amid Surging Wheat Supply1. Introduction: Bearish Opportunity in Wheat amid Rising Supply
With the U.S. Grain Stocks Wheat (USGSW) report showing a notable rise in wheat stock levels, a bearish scenario is unfolding for wheat futures. This increase in supply, which could drive prices downward, aligns with a technical setup showing potential for a bearish breakout.
From a technical perspective, Wheat futures exhibit a Complex Head and Shoulders formation, signaling a possible breakdown as prices approach a critical support level. By combining the supply dynamics and technical formation, this article outlines a Bear Put Spread strategy, ideal for capitalizing on this bearish outlook with limited risk.
2. Fundamental Analysis: Rising Wheat Stock Levels
The most recent USGSW report has recorded wheat stock levels breaking upward to 1.98 billion bushels, up from the previous level of 1.779 billion bushels. This shift indicates a higher supply of wheat available in the market, which, in the absence of proportional demand, typically should result in price pressure to the downside.
Higher wheat stock levels often dampen demand sentiment, as markets anticipate reduced scarcity and increased availability. Such fundamentals offer a conducive backdrop for a bearish approach, supporting the downside breakout anticipated in the technical setup.
3. Technical Analysis: Complex Head and Shoulders Formation
The technical landscape for Wheat futures supports the bearish case, with a Complex Head and Shoulders pattern forming on the chart. This pattern is characterized by multiple peaks (heads) flanked by smaller peaks (shoulders), indicating a potential reversal from recent highs.
The critical neckline for this formation sits at 585'6. A break below this level would signal the likelihood of further downside movement. The target for this setup aligns with a UFO support zone at 552'4, which serves as an optimal price point to close the trade if the breakout confirms.
4. Trade Setup: Bear Put Spread on Wheat Futures (Ticker: ZWH2025)
To capitalize on the bearish setup, a Bear Put Spread is employed. This strategy allows for limited downside risk while still offering attractive profit potential. Here are the specifics:
o Contract Details for ZWH2025 (Wheat Futures):
Contract Size: 5,000 bushels
Tick Size: 1/4 of one cent (0.0025) per bushel (equivalent to $12.50 per tick)
Point value of 1 future unit: $50
Point value of 1 option unit: $50
Expiration: December 27, 2024
Margin Requirement: While the exact margin depends on the broker, the requirement typically ranges between $1,500 and $2,000 per futures contract. The margin for a Bear Put Spread in Wheat futures options is limited to the debit paid (15.2 points *$50 = $760).
o Options Strategy: Bear Put Spread
Buy the 585 put option at 25.84 and Sell the 550 put option at 10.64, both expiring on December 27, 2024.
The net debit paid is 25.84 – 10.64 = 15.2 points = $760
This spread provides a capped-risk opportunity for profiting from a downside move in Wheat futures.
o Risk Management:
While stop loss orders can be used, no stop loss is required given the limited-risk nature of the Bear Put Spread. The maximum potential loss is predefined by the cost of the spread.
5. Options Risk Profile Analysis
The Bear Put Spread strategy involves buying a put option at a higher strike price (585) and selling a put option at a lower strike price (550). This configuration:
Maximizes potential profit if Wheat futures drop to or below the 550 level by expiration.
Caps maximum loss at the initial cost of the spread, regardless of how the underlying Wheat futures move.
For this setup, the maximum potential profit is the difference between the strikes (585 - 550) minus the premium paid = 19.80 ($990). The maximum potential loss is the cost of the spread, making it a controlled-risk strategy suited to volatile or downward-trending markets.
6. Trade Execution Plan
Entry: Initiate the Bear Put Spread as Wheat futures break below the 585'6 neckline, confirming the downside breakout.
Target: Close the trade at 552'4, which aligns with a nearby UFO support zone, marking a logical exit point.
7. Risk Management Considerations
Effective risk management is essential in any options strategy, and the Bear Put Spread inherently offers several risk control advantages:
Limited Risk: By buying a put and selling a lower-strike put, the Bear Put Spread creates a defined risk position, capping potential losses at the initial premium paid for the spread.
No Stop Loss Required: With maximum risk predetermined by the cost of the spread, there's no need for a stop loss, which could otherwise be triggered prematurely in a volatile market.
Predefined Entry and Exit: This strategy's effectiveness hinges on precise entry (below the 585'6 neckline) and a clear target at 552'4. By maintaining these predefined parameters, the trade maximizes its alignment with both technical and fundamental setups.
This trade setup offers a balanced approach, allowing for downside exposure with risk under control, making it well-suited for periods of volatility or substantial downward moves.
When charting futures, the data provided could be delayed. Traders working with the ticker symbols discussed in this idea may prefer to use CME Group real-time data plan on TradingView: www.tradingview.com - This consideration is particularly important for shorter-term traders, whereas it may be less critical for those focused on longer-term trading strategies. Also, some of the calculations and analytics used in this article have been derived using the QuikStrike® tool available on the CME Group website.
General Disclaimer:
The trade ideas presented herein are solely for illustrative purposes forming a part of a case study intended to demonstrate key principles in risk management within the context of the specific market scenarios discussed. These ideas are not to be interpreted as investment recommendations or financial advice. They do not endorse or promote any specific trading strategies, financial products, or services. The information provided is based on data believed to be reliable; however, its accuracy or completeness cannot be guaranteed. Trading in financial markets involves risks, including the potential loss of principal. Each individual should conduct their own research and consult with professional financial advisors before making any investment decisions. The author or publisher of this content bears no responsibility for any actions taken based on the information provided or for any resultant financial or other losses.
Wheatfutures
Wheat Futures Are at a Crossroads – Here’s What I’m SeeingAlright, here’s where things stand with wheat futures, and this one feels like it’s balancing on a knife’s edge. We’re sitting right around 571, and honestly, the chart could break either way. Moments like these can be exciting, but they’re also where preparation makes all the difference—whether you catch the right move or get left chasing after it.
If the price drops below 564, we could see it slide down to 554, 543, and maybe even 535. This kind of move would likely mean that supplies are holding strong, or demand is weaker than expected. It might not happen all at once, but once that first level breaks, sellers could pile on, and each support level below becomes the next stop on the way down. It’s like the market testing where buyers are willing to step back in.
But if the bulls get their act together and push above 600, the game changes. That’s the kind of breakout that could attract a lot of momentum and send prices heading toward 620. It wouldn’t take much—maybe bad weather affecting crops or surprising export numbers—and suddenly, we’d see buyers jump back in with force. When a psychological level like 600 cracks, traders love to pile on, and things can move quickly.
This is one of those trades where you’ll want to stay sharp. Just watch the levels, have a plan, and let the market show you the way. Whether it’s a slide down or a breakout higher, there’s opportunity either way. If this breakdown helped, like, boost, follow, and drop a comment—always better when we trade together.
Mindbloome Trader
Is This the Beginning of a Global Food Crisis?Wheat, a cornerstone of global food security, is facing unprecedented challenges.
Rising temperatures, extreme weather events, and geopolitical tensions are converging to create a perfect storm for wheat production. The result? A significant wheat rally that could have far-reaching implications.
Climate Change's Impact:
As the planet warms, wheat-growing regions are becoming increasingly vulnerable. Extreme heat and unpredictable weather patterns are disrupting harvests and reducing yields. This is especially pronounced in Europe, where persistent rainfall and heatwaves have devastated crops.
Global Supply Chain Disruptions:
The war in Ukraine, coupled with export restrictions and transportation challenges, has further strained global wheat supplies. This has led to a surge in demand for wheat from other regions, exacerbating the price increase.
The Looming Food Security Threat:
The rising cost of wheat, a key ingredient in many staple foods, poses a significant threat to food security, particularly in developing countries. As prices continue to climb, access to affordable food becomes increasingly difficult for millions.
The Road Ahead:
The future of wheat production and global food security is uncertain. The world must adapt to the changing climate, invest in sustainable agricultural practices, and develop strategies to mitigate the risks posed by geopolitical tensions. The stakes are high, and the time for action is now.
Can We Unravel the Mysteries of Wheat Market Stability?In an era of interconnectedness and unprecedented challenges, the global wheat market stands as a critical linchpin of food security. Its intricate interplay of supply, demand, and geopolitical factors has profound implications for the world's ability to feed itself.
The wheat market, a cornerstone of global agriculture, is subject to numerous forces that can disrupt its equilibrium. Climate change, with its increasing frequency of extreme weather events, poses a significant threat to wheat production. Droughts, floods, and heatwaves can devastate crops, leading to shortages and price volatility. Additionally, the geopolitical landscape is fraught with tensions that can impact wheat trade. Conflicts, sanctions, and trade disputes can disrupt supply chains, limiting access to essential food commodities.
Moreover, the growing global population, coupled with changing dietary habits, is placing increasing pressure on wheat production. As incomes rise, consumers are demanding more diverse and protein-rich diets, which can drive up demand for wheat-based products. This increased demand, combined with the challenges posed by climate change and geopolitical instability, creates a perfect storm of uncertainty for the wheat market.
The future of wheat, and by extension, the global food system, hangs in the balance. Can we unravel the enigma of wheat market stability, or will the challenges posed by this vital commodity prove insurmountable? The answer to this question will determine the extent to which we can ensure food security for generations to come.
Long live cattleLive cattle went to the eight hour fib and has started to create a bounce. With corn, soy beans, and we even wheat up 2 to 4% today. Live cattle is going to potentially make up that gap in the next few days.
ZW: Wheat to Rebound with Fed Rate Cuts and Dollar DevaluationCBOT: Wheat Futures ( CBOT:ZW1! )
On Friday, July 12th, the United States Department of Agriculture (USDA) released its latest World Agricultural Supply and Demand Estimates (WASDE).
(Note: The WASDE report is published monthly and provides annual forecasts for global supply and use of wheat, rice, coarse grains, oilseeds and cotton, as well as the U.S. supply and use of sugar, meat, poultry eggs and milk. Today’s analysis will focus on wheat.)
USDA’s balance sheet update for the 2023/24 US wheat crop showed a carryout of 702 million bushels (mbu), as exports were taken to 707 mbu. For the new crop, USDA raises the wheat stocks by 98 mbu to 856 mbu. Some of the increases was a larger carryover, but most came in the form of higher production.
USDA raised the wheat crop by 133 mbu to 2.008 billion bushels (bbu). Harvested acres was raised from 38.0 to 38.8 million acres. Yield per harvested acres was raised by 2.4 bushels per acre (bpa) to 51.8 bpa. Winter wheat was up 46 mbu to 1.341 bbu, as the Hard Red Wheat (HRW) total was projected at 763 mbu (+37 mbu), with Soft Red Wheat (SRW) at 344 mbu (+2 mbu) and white winter at 234 mbu (+8 mbu). The initial other spring wheat figure was tallied at 577.8 mbu, more than 56 mbu above market estimate.
Global wheat stocks were raised by 4.97 million metric tons (MMT) to 257.24 MMT, with a bulk from the US, as both Canadian and Argentine wheat production were raised.
Wheat Futures drop across three futures markets, CBOT, KCBT and MGEX, after WASDE shows higher production.
• Jul 24 CBOT Wheat closed at $5.38, down 16 1/4 cents,
• Sep 24 CBOT Wheat closed at $5.50 3/4, down 20 1/2 cents,
• Jul 24 KCBT Wheat closed at $6.04, up 12 3/4 cents,
• Sep 24 KCBT Wheat closed at $5.67 3/4, down 16 cents,
• Jul 24 MGEX Wheat closed at $6.21, unchanged,
• Sep 24 MGEX Wheat closed at $5.97 1/2, down 21 1/4 cents
The weekly CFTC Commitment of Traders report showed CBOT wheat speculative traders net short 69,137 contracts as of July 9th, a reduction of 4,837-contract on the week. In KC wheat, they were trimming 2,292 contracts to 40,811 contracts by July 9th.
In my opinion, the futures market has quickly absorbed the bearish WASDE report. With wheat trading at historical low levels, a rebound may be brewing in the next few months.
Traditionally, August is the time to hedge weather risks in agricultural commodities. If summer weather in the Midwest and Great Plain regions turns out to be less than ideal, the previously expected higher yield will have to be adjusted downward, reducing total production.
In today’s market, how could the expected Fed rate cuts impact commodities?
Last Tuesday, July 9th, Fed Chair Jerome Powell appeared in a Senate Banking, Housing, and Urban Affairs Committee hearing on Capitol Hill.
The Fed Chair expressed concern that holding interest rates too high for too long could jeopardize economic growth. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”
“At the same time, in light of the progress made both in lowering inflation and in cooling the labor market over the past two years, elevated inflation is not the only risk we face,” he said in prepared remarks. “Reducing policy restraint too late or too little could unduly weaken economic activity and employment.”.
The prospect for quicker rate cuts increased immediately after these dovish remarks. According to CME Group FedWatch Tool, the probability of a 25bp rate cut in September is now 90.3%. Futures traders look for 3-4 rate cuts by the end of the year, with a 53.8% probability for the Fed Funds rate lowering to the 4.25%-4.75% range.
(www.cmegroup.com)
Would the lower interest rates be bullish for commodities like wheat?
Firstly, lower interest rates will reduce borrowing costs. This will help business grow, with more jobs, income and consumption coming along the way. At the end, it will help increase the demand for commodities such as wheat.
Secondly, as a major agricultural commodity, wheat is priced in the US dollar and traded in the global market. In previous writings I explained that lower interest rates would result in currency depreciation, as prescribed by the Interest Rate Parity theory (IRP).
For foreign buyers, dollar depreciation means an appreciation of their local currency. The cost of importing wheat will be lowered when converted in local currency. Lower costs help increase the demand for wheat.
Trading with CBOT Wheat Futures
The 3-year price chart for CBOT wheat futures shows three distinguished patterns:
• From February to April 2022, wheat prices nearly doubled from about $7 to $13. This was driven by geopolitical crisis and the fear of global supply shortage.
• From May 2022 to July 2023, the Fed implemented 11 consecutive hikes, which helped cut wheat prices by half to about $6.
• From August 2023 to present, as the Fed kept interest rates unchanged in seven FOMC meetings, wheat prices moved sideways in the $5.50-$7.00 range.
As we can see here, Fed policy and geopolitical crisis have an outsized impact on wheat prices, as compared with fundamental supply and demand.
In my opinion, the supply and demand factors are already priced in the market. However, the impacts from Fed rate cuts and outcome of the upcoming presidential election are not yet fully grasped by the market. The expected Fed loosening cycle would have the opposite effect of the Fed hikes. Wheat prices could potentially move up the $7.00-$9.00 by 2025.
On July 12th, the March 2025 contract of CBOT wheat futures (ZWH5) settled at $5.975 per bushel. Each contract has a notional value of 5,000 bushels, or $29,875 at market prices. Buying (long) or selling (short) one contract requires an initial margin of $2,000 at the time of writing.
CBOT lists 15 monthly contracts of Mar, May, Jul, Sep, and Dec. Wheat traders could take up positions two years from now, for the month of July 2026. Trading on the 3rd or 4th contract month would satisfy the liquidity requirements while allowing time for market-impacting variables to change, based on my experience.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
WheatUSD Oanda Buying Breakout Trend ContinuesRealising my folly from my previous trade, I recognised my faults.
Recap -
1st - I traded with the Higher Time Frame and Entry Time Frame Trends, but I am actually entering on a opposing trend against the Lower Time Frame, and that is why the price never move in my intended direction after hours.
The opposing trend movement is also a sign that price is tanking, and that the Big Boys might not be into this product anymore.
2nd - Trade Breakout Trends was my thang. But I subconsciously/consciously shifted my setups to Trend Following which is to buy high and sell higher. Low winrate, needs to gather a ton of trades before the results show, stressful way to trade. I recognised my fault and now I shifted myself back to Breakout Trends.
I would like to add on also that, I would see this as a price game instead of a time frame game. But I also recognise that 50/60MA on the 15Minutes Time Frame is very powerful, and I called it Duck Hunting and I would be hunting ducks again, on the 15 Minutes Time Frame.
Would I trade on the 4H Time Frame or the Hourly? It's a price game so as long as the price is right, and it aligns with my point 1 and 2, I would.
2019SGT
22052024
Inflation & Agricultural Prices - On the Rise Again Inflation is expected to rise again because the prices of staples such as wheat, rice, corn, and soybean meal have been increasing over the last two months. Additionally, we've seen a 20% increase in soybean meal prices since the low in February.
Chicago SRW Wheat Futures & Options
Ticker: ZW
Minimum fluctuation:
1/4 of one cent (0.0025) per bushel = $12.50
Soybean Meal Futures & Options
Ticker: ZM
Minimum fluctuation:
0.10 per short ton = $10.00
Disclaimer:
• What presented here is not a recommendation, please consult your licensed broker.
• Our mission is to create lateral thinking skills for every investor and trader, knowing when to take a calculated risk with market uncertainty and a bolder risk when opportunity arises.
CME Real-time Market Data help identify trading set-ups in real-time and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
Can wheat break above previous trendline support?Wheat
Technicals (May)
Wheat futures shot higher overnight but got stonewalled by what was previously trendline support (now resistance). A failure to close out above 550-555 keeps the Bear camp in control with a potential retest of the lows still in play. Further escalation in the Middle East could turn the tide back to Bullish.
Bias: Neutral/Bearish
Resistance: 573 1/2-575***, 595 3/4-600***, 608 1/2-611**
Pivot: 550-555
Support: 537-540***, 525**
Fund Positioning
Friday's Commitment of Traders report showed Funds were net buyers of about 5.4k contracts. That trims their net short position to 86,568 contracts.
Seasonal Trends
(Past performance is not necessarily indicative of future results)
Below is a look at price averages for July wheat, using the 5, 10, 15, 20, and 30 year averages. Historically this isn't the most friendly time of year.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Wheat Breaks Below SupportWheat
Technicals (May)
May wheat futures broke lower yesterday, after struggling to maintian price action above trendline support in the previous two sessions. This has the Bear camp back in the driver’s seat as we officially enter the back half of the week. A close back above 550-555 would neutralize the recent bearish action.
Bias: Neutral/Bearish
Resistance: 573 1/2-575, 595 3/4-600, 608 1/2-611**
Pivot: 550-555
Support: 537-540*, 525
Fund Positioning
Friday’s Commitment of Traders report showed Funds were net buyers of about 5.4k contracts. That trims their net short position to 86,568 contracts.
Seasonal Trends
(Past performance is not necessarily indicative of future results)
Below is a look at price averages for July wheat, using the 5, 10, 15, 20, and 30 year averages. Historically this isn’t the most friendly time of year.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Wheat Futures Riding a Fine LineWheat
Technicals (May)
May wheat futures traded in a wide range yesterday, on both sides of unchanged. This morning, prices are attempting to firm as the market revisits our pivot pocket from 550-555. The Bulls will want to see consecutive closes back above this pocket to spur a move back towards the recent highs. A failure to do so could put the Bears in the driver's seat.
Bias: Neutral
Resistance: 573 1/2-575***, 595 3/4-600***, 608 1/2-611**
Pivot: 550-555
Support: 537-540***, 525**
Fund Positioning
Friday's Commitment of Traders report showed Funds were net buyers of about 5.4k contracts. That trims their net short position to 86,568 contracts.
Seasonal Trends
(Past performance is not necessarily indicative of future results)
Below is a look at price averages for July wheat, using the 5, 10, 15, 20, and 30 year averages. Historically this isn't the most friendly time of year.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Grain Futures Gain GroundGrain futures are higher in the early morning trade as some as headline risk looms into the weekend.
Corn
Technicals (May)
May corn futures are fractionally lower in the early morning trade as prices linger near our pivot pocket from 431 1/2-435, which just happens to be right near the middle of first support and first resistance. We like the upside potential in corn but some of the deferred contracts have a more friendly technical landscape than the May.
Bias: Bullish/Neutral
Resistance: 441 3/4-444 1/2***, 447 1/2-450****
Pivot: 431 1/2-435
Support: 421-422***
Fund Positioning
Friday’s Commitment of Traders report showed that Funds were net sellers of about 8k contracts (through 4/2/24), that puts their net short position at 259,556.
Seasonal Trends
(Past performance is not necessarily indicative of future results)
Below is a look at price averages for December corn, using the 5, 10, 15, 20, and 30 year averages.
Technicals (May)
May soybean futures are fractionally higher in the early morning trade. Support from 1170-1175 will continue to be very important for the Bulls to defend through this week's trade. A break and close below could spark another wave of pressure. On the resistance side of things, they want to see a close above resistance from 1198-1205 1/2.
Bias: Neutral/Bullish
Resistance: 1198-1205 1/2***, 1212 3/4-1216***
Pivot: 1187
Support: 1170-1175***, 1161-1167****
Fund Positioning
Friday's Commitment of Traders report showed Funds were net sellers of roughly 3.5k contracts, trimming their net short position to 138,256 contracts.
Seasonal Trends
(Past performance is not necessarily indicative of future results)
Below is a look at price averages for November soybeans, using the 5, 10, 15, 20, and 30 year averages.
Wheat
Technicals (May)
Wheat futures broke out above trendline resistance last week which adds to the recent trend of higher highs and higher lows. If the Bulls can achieve a close above resistance from 568 1/2-570 we could see it open the door for an extension towards the psychologically and technically significant $6.00 level.
Bias: Neutral/Bullish
Resistance: 568 1/2-570***, 595 3/4-600***, 608 1/2-611**
Pivot: 550-555
Support: 525**
Seasonal Trends
(Past performance is not necessarily indicative of future results)
Below is a look at price averages for July wheat, using the 5, 10, 15, 20, and 30 year averages. Historically this isn't the most friendly time of year.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
Seasonal Weekly Chart For WheatSupply and demand zones for Wheat on the weekly chart.
Once you enter the zone, look for the lower timeframe reversal patterns, extended waves, classic trendline breaks, etc.
Drop down to the Daily for refined supply and demand zones.
Drop down to 1 hour chart for the current trend after you see the reversal pattern.
wheat in strong downtrendwheat is ready to go... excellent RR here... not only 3.5 to first target, but ocasion to build position towards much lower... moving stops to Be or trail
*not financial advise
WHEAT Seasonal Trade! We are coming into WEEKLY Demand on Wheat.
Wait for the "reaction" inside of this demand zone on the 5 minute chart to start going long.
Wheat Futures IdeaI will monitor price action on this floor and have set alerts for entry.
Wheat futures need a correction to the upside.
Let me know your thoughts.
The Professor
SW: Weak Wheat Prices Are Here to StayCBOT: Wheat ( CBOT:ZW1! )
In stark contrast to the rising stock market, most agricultural commodities have lost ground in 2023. In the Grain & Oilseeds market, CBOT Soybean (ZS) finished the year at $12.73 per bushel, down 14.7% year-on-year. CBOT Corn (ZC) closed at $4.63/bushel, down 30.8% YOY. CBOT Wheat (ZW) settled at $5.93/bushel, down 24.5%.
In the Livestock & Meat market, CME Group Lean Hog (HE) lost 23.2%, while Pork Cutout (PRK) was down 13.0% YOY. Live Cattle (LE) was the only exception with a 10.3% gain.
Despite bad weather, supply chain bottleneck, rising cost of borrowing, and escalating geopolitical conflicts in Europe and the Mideast, farmers around the world managed to produce higher outputs of grain and meat. With food demand remaining weak, this surplus supply pushed the prices of food ingredients downward.
The WASDE Report
Today, we will focus on wheat, which saw huge price volatility in the past five years. According to the latest World Agricultural Supply and Demand Estimates (WASDE) report, published by the United States Department of Agriculture (USDA) last week:
• Global wheat output for 2022/23 was 789.17 million metric tons, up 1.2% YOY;
• Output for 2023/24 was estimated at 783.01 in December but revised up to 784.91;
• Global supplies are raised by 3.6 million tons to 1,056.5 million on higher beginning stocks and production.
In the US, average yield per harvested acre was 46.5 bushels in 2022/23, up 5.0% YOY.
• The WASDE estimated yield to grow 4.5% more to 48.6 bushels in 2023/24;
• Across all wheat varieties, total US production was estimated at 1,646 million metric tons in 2021/22, 1,650 in 2022/23 (+0.2%) and 1,812 in 2023/24 (+9.8%);
• The 2023/24 season-average farm price is forecasted by $0.10 per bushel lower at $7.20, based on prices received to date and expectations for the remainder of 2023/24.
Quick Review of My Previous Trade Idea on Wheat Futures
A rule of thumb for agricultural commodities: Their market prices are very sensitive to supply changes. Due to weather perils, deceases, shipping route blockage, among others, significant uncertainties surround food availability in terms of quantity and quality. On the other hand, demands for agricultural commodities are relatively stable, and have a smaller effect on price changes.
In February 2022, the breakout of Russia/Ukraine conflict sent wheat prices up 70% within two weeks, from $7 to $12 a bushel. The two countries accounted for about 28% of the global wheat export market. Investors panicked that geopolitical conflicts could cut off the wheat supply.
It turned out that the fear was overblown. Despite the ongoing conflict, Russia and Ukraine agreed to keep the Black Sea grain shipping routes open. By July 2022, wheat prices were back to $7.50 a bushel, down 60%.
On June 2022, I published a trade idea on Long Strangle options strategy on Wheat Futures. Below is a follow-up report on how that wheat options trade performed:
Trading with CBOT Wheat Futures
The World Bank forecasts the global economic growth to slow for the third year in a row — from 2.6% in 2023 to 2.4% in 2024, which is almost three-quarters of a percentage point below the GDP growth average of the 2010s.
Slowing economy points to a weak demand for wheat this year. Consequently, the expected wheat supply increase would put further pressure on wheat prices.
Another supporting evidence: I observe that in the past five years, wheat price trend closely tracks that of the US CPI for food (see title chart). Food CPI peaked in August 2022 at 11.4%, but it is sharply down to 2.7% in December 2023. During the period of runaway inflation, food prices were a major contributor to inflation, which drove headline CPI and core CPI higher. Now, food inflation is below both.
The January 16th CFTC Commitments of Traders report (COT) shows that “Managed Money” holds 73,485 long positions and 142,060 short positions on wheat futures. The long/short ratio of 1:2 indicates that speculative traders are bearish on wheat prices.
Last Friday, the March wheat contract (ZWH4) was settled at $5.93 per bushel. In my opinion, wheat prices could fall further to test $5 a bushel, a level not seen since 2020.
Each wheat contract has a notional value of 5,000 bushels, or $29,662 at current price. To acquire 1 contract, a trader is required to deposit an initial margin of $2,500.
Hypothetically, if futures price falls by 50 cents a bushel, a short futures position would gain $2,500 (= 0.50 x 5000). Using the $2,500 initial margin as cost base, a short trader could realize a theoretical return of 100%, excluding commission.
If crop yield is to grow less than expected, or if wheat demand increases more than expected, wheat futures could rise, and a short position will stand to lose money.
Happy Trading.
Disclaimers
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com
WHEATF | Wheat Poised for a Rebound!👋 Good day, traders!
📈 After a two-month decline on the D1 chart, WHEATF has found support at the 540 level. Given its month-long accumulation phase and the completion of its downtrend, a breakout above the 587.75 resistance level could signal a rally towards target levels of 615.00, 660.00, 695.00, and 732.00. Consider buying entries around the 595.00-600.00 range, targeting potential profits of 3.3% to 23.0%, with a SL set at ~565.00.
✅ Give a 👍 if you're keen on more insightful and profitable trading ideas❗️
❓ I'd love to hear your thoughts. What's your take on this?
DISCLAIMER:
This idea is purely informational and educational. It's not a trading recommendation. Each trader should analyze and make decisions based on this information independently.
Wheat and Fertilizer Futures: A Cash Cow for War Mongers In this layout I have Black Sea Wheat and Corn, Australian and Ukrainian Wheat, and 4 main Fertilizer (UREA) Futures.
Conflict and Wars are good ways for Financial Institutions like Black Rock and State Street Corp oration to make a lot of money. What better way than to destroy the wheat fields/silos themselves and profit at the same time?
These markets are built in blood and they are sitting on Advanced Fibonacci Blueprints showing who is really in control.
Volatility may be seen as many Russia pulled out of the Black Sea Grain Deal. Wheat supplies will undergo straining for the foreseeable future.
ZW- Wheat Futures Reverse to Upside LONGZW is shown as the December 2023 contracts on the 2H chart have reversed
in the past two days and price has increased over 2% in that interval.
The indicators show a flip in the volatility and a blue bar volume spike
in the reversal. Price is presently about 15% below the double tops and
pivot highs of June and July. Price is presently crossing over the mean
VWAP anchored 7-8 trading days ago and so demonstrating the bullish
momentum of the past couple of days.
I see this as an excellent long trade setup especially suitable to using
leverage in the trade and expect the uptrend to potentially capture
a 7-8% gain in the retracement of the downtrend then amplified by
the leverage applied.
Wheat: Time for the turning point ⤴️🚀The recent downward movement has brought the wheat price into our blue trading zone and thus the minimum requirement of the current blue corrective wave (b) has been fulfilled. We expect it to go a little lower, but gradually the price should now form the end of the wave, allowing long entries. In the further sequence, we see the price rising above the resistance at USX 807.25, where we locate the high of the turquoise wave A. However, if the bears dominate and push the price lower, there is a 25% chance that the price will fall below the USX 611.25 support level, which buyers may want to keep in mind.
