As I head down the road on my way home from the office, I pass farmers working hard in their fields combining soybeans. In Wisconsin, it’s true, “nothing runs like a Deere”. However, soybeans are not where my mind takes me, but to another commodity all together, wheat. More specifically the weekly chart of wheat, using the continuous current contract in front (ticker: ZW1!). When you look at a long term chart of wheat, you can see that it has done anything but, “run like a Deere”, since the mid-1970’s . 

Image for illustrative purposes only

At Adaptiv™, we understand the importance of studying supply and demand, just as farmers do with their agricultural products. Studying the price movement of wheat has shown us that sellers have shown up in force numerous times around the 615’0 price level over the past 45 years. Wheat was rejected at this level in 1974, 1981, and 1996 before it finally left the hopper and broke out of a 33 year and 180% base in 2007.  This breakout took wheat to highs around the 1200’0 – 1300’0 price level in 2007, before breaking down below 615’0 in 2008. The 615’0 price level also served as a lone area of support more recently in 2012. 

This week, wheat has broken above the 615’0 price level and is looking like it wants to jump out of the hopper once more. This time wheat is breaking out of a 5 year and 60% base. 

A sustained breakout from this base is targeting the 986’0 price level, which is a logical level, as it has served as an important resistance level following the 2007 breakout and into 2008.

 If we were looking to harvest some wheat of our own, we’d hop in the combine and get involved above the 615’0 price level. If sellers push wheat back below the 615’0 price level, we would know that we are wrong and would look to park the combine in the barn and wait for another opportunity.

 

P.S. If you would like more insight as to our thoughts and viewpoints on the market, including specific insight into client portfolios, please remember to subscribe to our podcast “The Weekly Trend” on your favorite streaming platform!

Client First Investment Management LLC is a Registered Investment Advisor This writing is for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction, or as an offer to provide advisory or other services by Client First Investment Management LLC in any jurisdiction in which such offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Client First Investment Management LLC​ expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.