Wheat Backed By COT And Price Action. Russell 2000 In The Spot Light

Wheat Backed By COT And Price Action. Russell 2000 In The Spot Light

Those many small bars, we've talked about in the last blog post "A Lot of Small Ranges and How to Take Advantage of Them", led to large ranges. That makes it difficult now to find good moves. But some interesting situations are worth mentioning.


A short-term COT pattern appeared this week in Wheat. This pattern is bullish for Wheat and suggests that there is a 70% chance of a move to the upside. Such a scenario is backed by the divergence between the On Balance Volume and the price. See the chart below.

Wheat analysis 05/04/2020 - 05/08/2020

That divergence is indicated by purple arrows. As you can see while the price is making lower lows the OBV is staying flat.

Support for the bullish scenario is coming from the Price Action. The last three bars are talking of an upcoming up move. The No Tail 2xN Long Nose speaks of no continuation for the down move and for an up bar. The up bar came in a form of 1xT. That's suggesting bullish move if the high of the 1xT is penetrated. The last day, Friday. is an inside 0T which also speaks of no continuation of the down move.

If on Monday the market can break above that small gap (marked with red) I'll search for buy signals. Price Action catalysts after Monday's open would make the signal stronger. Stop-loss is best to be below Thursday's low. That level also invalidates the bullish scenario.


Similar is the situation with Russell 2000 futures. See the chart below.

Russel 2000 futures analysis 05/04/2020 - 05/08/2020

On Balance Volume is showing accumulation. The market fell down to the trendline and the last bar was a 0T2xN. This bar suggests that the next day can be expected to be an up day. If on Monday Russell shows strength and closes the gap above I'll be looking for long signals.

That is valid for all major US indices. I've posted here Russell because the price action model is the clearest here. But most probably Monday will start with gaps and any price action catalysts might make the signal in another index clearer.

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Now, let's find your missing piece!

Vassil Banov,
Founder of Piece of Trading

Trades mentioned here are either taken or will be taken by the author if the right conditions appear. They are NOT recommendations nor any of this constitute investment advice. Please read the Risk Disclaimer
Seasonal indicators courtesy of Larry Williams, ireallytrade.com. Charts made with TradeStation®. tradestation.com

TAGS: S&P500, SPY, SPX, Russell 2000, RTY, COT, Commitments of Traders, Wheat, Price Action Trading

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