Wheat futures traded higher in Thursday's session after Wednesday's nearly limit down move triggered by a bearish USDA crop report. It appears the drop to the $6.00 per bushel level exhausted the selling pressure, setting up for a possible countertrend rally from the lows.

The price action over the week culminated in a Pennant chart pattern on the hourly time interval. Thursday's reversal sets the price at the top end of the pattern, just below the resistance at $6.20 per bushel. Momentum buying in Friday's session could propel the market above the breakout point for a continuation of the recovery.

Traders will be watching the resistance trend line closely for signs of strength or weakness to position for the longer term. A pullback from this level would suggest the pennant is not yet complete, and invite another push lower to another test of the $6.00 per bushel support. A breakout above the pennant formation could drive the market upwards to the pre-report gap area on the chart near the $6.50 price, especially if it is accompanied by a strong momentum reading.

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