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COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(August 14, 1997) WHEAT: Exports remain strong, but the projected large crop is keeping prices a bit on the defensive. Spec selling was noted. There is a freeze and frost warning in Canada, which may provide support to the wheat market. Wheat got a double whammy in that the USDA raised U.S. production, and also raised production in China and the FSU. Production was cut in Canada, Argentina and Australia. It is possible that El Nino is responsible for production problems in Argentina and Australia. I am of the opinion that the lows are in, and that breaks are buying opportunities. Expect choppy action higher over the long haul. Tuesday's action was a good example of the dangers of buying strength in this market. Ample supplies as a result of harvest suggest that the market may be slightly on the defensive, but should work higher off the harvest lows. This is not a weather market, although rain in harvest areas is supportive. Traders should begin to focus on this as a relatively low-risk, long-term trade.
RECOMMENDATION–The December chart is becoming a tad negative. Support basis December remains near 372, 368, 365, 363, 355, and 352. Resistance lies near 383, and 388-391, 398 and 402- 404. Traders could continue to probe the long side of December wheat on 5-7 cent dips or on a pullback to the lower 370's, mid 360's. Use stops of 5-10 cents or under 355. If very conservative, hold out for a dip to the low 360's, upper 350's, as a break to that level can't be counted out. Use stops of 10 cents or so. Objective is open. Be alert for failures on rallies and false breakouts. Option traders should buy December calls for the long pull. Objective is open.
M. Steven Morgan
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