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Wheat rises sharply

We recommended buying corn and wheat in the June 13th edition - marked by the blue arrows. Corn has done little since then except range-trade but wheat has exploded higher on crop worries:

Corn & Wheat weekly comps

This move has been quick and big enough to generate a daily-scale top extension yesterday and no doubt we will see another today (today's prices are included on this chart):

Wheat daily top ext

This is difficult. Prices of both corn and wheat have moved higher from weekly-scale compressions which almost certainly means that an upmove that starts now will last for a few months, so longs should hold. On the other hand a daily-scale top extension means that the move is getting overdone in the shorter-term and that a pullback toward support is likely. That pullback may not come for another day or two (so could be from higher levels) and it may not be all the way back to the compressed levels on the weekly wheat chart show above. What to do?

We are inclined to take some wheat profits here and wait to re-establish any liquidated longs on that expected dip. Our trading time horizon is usually only a few weeks but if you are a longer-term player, just hold on.

 All signals courtesy of software supplied by our friends at Parallax Financial Research www.pfr.com