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Three Black Crow Pattern in Wheat Prices

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Jan. 7 2016, Updated 7:05 a.m. ET

Trend in wheat prices

March wheat futures were trading below the key support of $4.70 per bushel on December 23, 2015. The sharp downward price movements continued. This resulted in the three black crow pattern on the day. It suggested that wheat prices could rise before Christmas. Wheat prices continued to trade below the key moving averages on December 23, 2015.

Wheat prices could be $4.60–$4.80 per bushel in the near term.

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Price drivers

Favorable snowfall forecast in the US Great Plains would support the wheat output sentiment by protecting the wheat from winter kill. Speculation of stronger wheat production pushed wheat prices down. Tough competition cues from Argentina’s wheat threatened the US wheat export share on December 23, 2015. It kept the prices under pressure. On December 23, appreciation in the US dollar by 1.3% added to the woes. It hurt US exports.

Unfavorable and above average weather conditions could result in higher winter kill for the wheat crop in the Black Sea region. Lower production cues from the area supported US wheat prices on December 23, 2015.

Stocks review

Falling wheat prices benefited food businesses as the cost of input materials fell. Pilgrim’s Pride (PPC) and General Mills (GIS) rose by 0.87% and 0.99% for the third and fourth consecutive day on December 23, 2015. This added 3.5% and 6.5%, respectively. After prices rose for two days, Hormel Foods (HRL) fell by 0.96% on December 23, 2015. J.M. Smucker (SJM) also rose by 1.5% on December 23. It recovered from a slight fall the day before. ETFs like the VanEck Vectors Agribusiness ETF (MOO) rose by 1.7% for the second consecutive day. It rose by 3.3% in two days.

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