With no end in sight to the Russia-Ukraine war, the possibility of a shortage becomes a growing global concern. Between them, the two Eastern European countries account for 28.3% of the world’s supply, according to Germany’s Federal Office for Economic Affairs and Export Control.
Though wheat prices surged immediately after Russia’s attack on Ukraine began in late February, with futures hitting an all-time high of $1,350 on Mar. 7, they’ve since corrected and consolidated, trading around $1,095 at time of writing.
But the knock-on effects of the supply bottleneck caused by the conflict are now impacting fertilizer prices, which have shot to all-time highs. This exacerbates the cost of wheat production and could have an impact on the future price of the agricultural commodity which is also a staple of world food supplies since it’s used for making bread.
Technical signals indicate the price could be about to rise as well.
Wheat prices are now 23% lower than the early March record high. However, the price may be bottoming.
Recent trading has created an H&S bottom. If bulls absorb all the available supply and still want more, they will push the price above $1,120. This would complete the base, and set a chain reaction in motion.
The momentum for that move will likely be near the $1,300 level and may even test the current record.
Trading Strategies
Conservative traders should wait for the price to close above $1,160 and remain above the neckline for three days, preferably including a weekend.
Moderate traders could risk a long position if the price traverses the $1,152 level and stays above the neckline for two days.
Aggressive traders would be content with a close above $1,136 and a single day above the neckline before going long.
Trade Sample – Aggressive Long Position
- Entry: $1,120 (after closing above $1,136)
- Stop-Loss: $1,115
- Risk: $5
- Target: $1,270
- Reward: $150
- Risk-Reward Ratio: 1:30
Author’s Note: The above is a general trade sample. It’s meant to showcase the salient points of a basic plan. Ideally, a trader would customize their own plan to address their budget, timing, and temperament. Until one can do that, use our samples for learning purposes, but with no real expectations of profit. Results will improve as traders learn how to develop their strategy.
