Wheat futures exploded higher in last week's trading, leading the entire grain complex into highs not seen since the record-setting bull market of 2008. The strength shown across the board may continue into the week ahead, with Wheat futures having pushed through the upper end of a very large Channel Up chart pattern- seen here on the 30-minute time interval.
This Channel Up has a broadening range, meaning the initial distance between the support and resistance lines that define the channel are gradually widening over time, creating both a wider and higher trading price range. This pattern has allowed for a significant amount of volatility within the channel, and indeed the market has managed an overall rally of nearly $1.00 per bushel since the pattern began to develop. Wheat closed out Friday's session by surging through the top end of the Channel Up, and though it has not yet executed a breakout signal on the Autochartist platform, any further upside momentum is likely to do so.
This makes the current trading range pivotal for determining near-term direction relative to this longer term pattern development. A continuation above these levels may initiate a price projection into a much higher trading range, perhaps confirming a new leg of this bull market has begun. Conversely, weakness at this level is likely to be viewed as confirmation of resistance at the upper end of the Chanel Up formation, encouraging profit-taking on long positions in advance of a price correction and a consolidation of gains back inside the channel. If this occurs, Friday's action will look more like a failed breakout, and open the door for a possible retracement back to the rising support level defined by the bottom of the Channel Up- currently near $7.90 per bushel in the nearby Wheat futures.
This is a well developed pattern with solid internal readings, and is also one of the few technical indicators to provide guidance for traders at these lofty price levels, where there is a notable absence of prior trading activity to draw information from. Until the market establishes a new trading range, the action seen here at the top of the Channel will likely be a strong chart point to establish direction and price targets for the next move.
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