Don’t get Chaffed this week on Wheat (KW)

Wheat (KW) has rebounded off its recent September 13th low of about $685, closing Friday at $759. Will the recovery continue? We’ve seen this pattern of trading behavior in Wheat before, and for the next 10 days you might consider going Gluten Free.

We looked at two unique price patterns through Friday for KW. The first, starting with the most recent high of $917 from last November 29th, and the second starting with the 2013 low of $674 on July 2nd. We then compared both price patterns, independently, to all highly correlated instances of each pattern in Wheat over the past 13 years. The results are compelling:

• There were 6 highly correlated instances of the 11 month (November 29th to current) price pattern, and in 5 of the 6 the average return over the next 10 days was -5.79%.
• There were 18 highly correlated instances of the price pattern since July 2nd of this year, and in 13 of 18 the average return over the next 10 days was -3.26%.

Price Pattern of Wheat (KW) from November 29, 2012

The next 10 days return on Wheat (KW) after each highly correlated historical instance of this trading pattern

Price Pattern of Wheat (KW) from July 2, 2013

The next 10 days return on Wheat (KW) after each highly correlated historical instance of this trading pattern