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ZW1! trade ideas

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
CBOT:ZW1!Short
by JimHuangChicago
Wheat - First Pump, then DumpIn wheat today, there was an impulsive increase of approximately 4%. However, indications suggest that this surge may lack sustainability. When considering the price in relation to standard deviations, two noteworthy observations emerge: a zone of high liquidity aligns almost precisely with the range of a double standard deviation. Nevertheless, a substantial amount of sell-side liquidity awaits below, ready to be tapped. For these reasons, we hold a mid-term bearish outlook on wheat. The outlined trading idea is presented as a suggestion for a specific trade opportunity, featuring a risk-reward ratio exceeding 2.6:1.
CBOT:ZW1!Short
by Ochlokrat
WHEAT Struggling on the 1D MA200. Long-term sell opportunity.Wheat (ZW1!) has been trading within a Channel Down pattern since July 2022 and since early December has failed repeatedly to detach itself above the 1D MA200 (orange trend-line). Since it is closer to the top (Lower Highs trend-line) of the pattern and it resembles the February 14 High, we expect a strong selling sequence if the price breaks below the 1D MA50 (blue trend-line). The previous Lower Low was priced on the 1.786 Fibonacci extension from the Lower High. That gives us a projected target of 413'0. ------------------------------------------------------------------------------- ** Please LIKE 👍, FOLLOW ✅, SHARE 🙌 and COMMENT ✍ if you enjoy this idea! Also share your ideas and charts in the comments section below! This is best way to keep it relevant, support us, keep the content here free and allow the idea to reach as many people as possible. ** ------------------------------------------------------------------------------- 💸💸💸💸💸💸 👇 👇 👇 👇 👇 👇
CBOT:ZW1!Short
by TradingShot
1
Two indications supporting long tradeOn the daily, the 20MA is about to cross up over the 100. This after bouncing off the .618 Fib as support. While commentary is mostly still at least slightly bearish on Wheat, or at least not bullish, due to ample supply, there are several obvious factors going forward that make continued record production uncertain. Furthermore, the real cost of producing wheat, such as loss of biodiversity, soil degradation and wheat's role as livestock feed and which will have to be accounted for one way or the other, makes this current price unrealistic.
CBOT:ZW1!Long
by R0llins_
2
Sell Dec. wheat at 5.45 stopsell Dec. wheat at 5.45 stop **Trading commodity futures and options involves substantial risk of loss. The recommendations contained in this letter is of opinion only and does not guarantee any profits. These are risky markets and only risk capital should be used. Past performance is not indicative of future results** hypothetical performance results have many inherent limitations, some of which are described below. no representation is being made that any account will or is likely to achieve profits or losses similar to those shown. in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. one of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. in addition, hypothetical trading does no involve fina ncial risk, and no hypothetical trading record can completely account for the impact of financial risk in actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. there are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all of which can adversely affect actual trading results.
CBOT:ZWZ2023Short
by Cannon-Trading
hour ZWZ short below 570 SQ9Day view, hour frame. Shorting below 570 SQ9 level, only after market open at 15h30 UTC+1 and if below 570 is confirmed. Reasons: - on a very wide view, d ZW1 Elliott master trend counting seems to be askng for new lows back to today ZWZ hour frame: - we are below Pivot level 579.50 - Yellow asc 1/1 as bull support brokne at friay open, confirmed so far with overnigth session - Yellow desc 1/1 could be reached today after open at conjunction of other Gann line crosses and SQ9 level of 563.25 which is today conservative short target. end session ends this proposed idea.
CBOT:ZWZ2023Short
by P314159