It was an interesting trading day today. The confluence of setups Friday, the fundamental news this weekend and morning (swine flu, the flight in NYC), and today’s market activity are all part of the same puzzle. Wheat illustrated some interesting trading concepts today; let’s take a look at it.
I’ve been watching 548-4 as a price objective for the past week. It’s a 50% retracement of the early April selloff, and the market was approaching it last week.Momentum had risen to a short sell signal last week (I drew a blue dashed line to show this).Friday was a breakout bar; it had the narrowest trading range of the previous four sessions.This setup meant we were looking for a directional move today.
The night session saw the 548-4 objective reached, but no follow through when it was hit.The inability to extend the rally led to selling pressure, this intensified when the 543 session open and Friday’s low at 536-2 were taken out.The previous session’s high and low are prices I watch for breakout trades. When the low was taken out wheat broke through additional retracement support at 531-4 and 527-0, then the 4/16 swing low at 525-2.
For tomorrow I’d look for a short covering rally; breakout trades often reverse themselves the following day. In addition, momentum has dropped to a buy level. The 4/20 low at 512-4 is the next target. MACD is still in a bearish posture; its pattern indicates the downside could see accelerating action if it gets going.
Good breakout sale
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