US Wheat Review on Wednesday: Jumps on technical buying, short covering

 

 

Short covering and technical buying shoved U.S. wheat futures higher Wednesday, but analysts said prices did not rally high enough to overhaul the markets' bearish technical picture.

 

Chicago Board of Trade March wheat closed up 14 1/2 cents, or 3%, at US$4.96 3/4 a bushel. Kansas City Board of Trade March wheat jumped 15 3/4 cents, or 3.2%, to US$5.05 3/4. Minneapolis Grain Exchange March wheat added 9 1/2 cents, or 1.9%, to US$5.15 1/4.

 

CBOT wheat is vulnerable to short-covering rallies because non-commercial speculative funds hold a large net short position, traders said. The market hit buy stops as prices rose, they said.

 

"The trade's been short wheat," said Dave Marshall, an independent marketing adviser and commodities broker. "Everybody except for index funds has been short forever."

 

CBOT March wheat closed above resistance at US$4.90 and made a run for the next resistance level at US$5.04. The nearby contract in electronic trading hit a session high of US$5.03.

 

The rally did not change the bearish technical picture for CBOT March wheat, but a close above US$5.04 would move it toward a sideways pattern, Marshall said. Traders want to see a close above US$5.20 to US$5.25 to indicate that the market has stopped going down, he said. Closes above US$5.45 to US$5.50 would set in motion a return to US$6, he said.

 

 

Kansas City Board of Trade

 

KCBT wheat climbed in thin volume as light buying and short covering triggered buy stops, traders said. KCBT wheat finished with the strongest gains, although CBOT wheat initially led the upside.

 

The rally has "no fundamental [justification], unless there's been news that came out with that Iraqi tender," a floor trader said.

 

Iraq tendered for wheat, according to reports, but traders said it looked like the business was going to go to Canada.

 

 

Minneapolis Grain Exchange

 

MGE wheat trailed the other markets. Funds are less active at the MGE than at the CBOT and KCBT.

 

The gains were technical as the fundamental storyline has not changed, traders said. U.S. and world supplies are large, and export demand has been lagging.