Wheat futures were dragged sharply lower in Monday's session as much of the commodities sector followed equities down. Fund liquidation in the grains hit the wheat market especially hard, carrying the nearby futures below $6.50 per bushel before a mid-day recovery. This price action established a retest of the Channel Down chart pattern illustrated here.
The pattern has formed on the hourly time frame with well defined resistance at the $6.68 per bushel level. This rice is likely to be tested on any stabilizing in the stock market, as most of the selling pressure in grains is a spill-over effect from equities. Wheat closed Monday's trading session in the middle of the Channel Down chart pattern and have developed a tight trading range at the $6.50 per bushel level.
A move to above $6.70 would trigger an upside breakout from the panel, which could mark the swing low below $6.50n as a long term low for the market. Continued weakness in equities would likely send wheat back to the bottom of the channel, which is currently resting at $6.40 per bushel. As the futures are now 70 cents off of last week's high. A relief rally appears the most probably outcome from this range.
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