Technical Analyst, Saxo Bank
Summary: Wheat strong support at 725 is key
Soybeans short-term uptrend is challenged and could reverse
Corn indecisive below 200 daily SMA
Coffee selling pressure easing and is bouncing. Was that the bottom for now?
Cotton range bound in tighter and tighter range. Break out imminent.
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Wheat: 725 seems to be a strong support for Wheat. Several times Wheat has bounced from 725 but has failed to gain upside momentum and Wheat seems stuck between 725 and 800.
Break out of that range is needed. If Wheat closes below 725 a swift sell-off down to around 677 and the weekly 200 SMA could be seen.
If Wheat can close above its short-term falling trendline there is resistance at 800. A close above 800 could lead to a rally to 855 possibly 900.
Underlying sentiment is negative however, with negative RSI and all Moving Averages declining.
Soybeans seem to be trading in a rising channel and is testing the lower rising trendline. A break of the trendline could lead to Soybean selling down to 1,450-1,425 . Strong support at around 1,417. Minor support at 1,465 should be observed.
If Soybeans manage to bounce from the lower trendline the uptrend is likely to continue.
However, divergence on RSI indicates Soybeans to trade lower.
Coffee has bounced back above 200 weekly SMA and support at around 147 after being hit with heavy selling. There is RSI divergence on weekly chart indicating the downtrend is exhausting and the bounce could continue higher. A bounce to test resistance at around 174 could be seen. It will however, require a close above the 55 daily SMA which could be a bit of a struggle.
Daily RSI is also showing negative sentiment with no divergence and needs to close above 60 to reverse that.
Bottom line; Coffee is in a down trend that seems to weakening and could have exhausted but it has not yet been confirmed.
Cotton is forming a symmetrical triangle like pattern and needs to breakout for direction.
A bullish breakout followed by a close above 89.65 is likely to push Cotton to the 0.618 retracement at around 104 where the 200 daily SMA is likely to provide resistance.
a bearish breakout and a close below 80.35 Cotton is likely to test October lows around 70.
RSI divergence explained: When instrument price is making a new high/low but RSI values are not making new high/low at the same time. That is a sign of imbalance in the market and an weakening of the uptrend/downtrend. Divergence or imbalance in the market can go on for quite some time but not forever. It is an indication of an exhaustion of the trend
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