The latest COT report is showing a bullish short-term COT pattern in Wheat. That is confirmed by the divergence we see between the price and the OBV. The price is making new lows, while the OBV doesn't follow (orange arrows). That breaking below the last bottom is a problem because the lower bottoms we see, the stronger the downtrend becomes.
I would have disregarded this setup if it was not the price action combination from the last few days.
What we see on the chart is an up Long Body followed by a down Long Nose and 00 bars. What is the most important is that the last two bars remain in the range of that LB. More to it, the last 00 bar we saw on Friday went down without making a tail. That selling was strong till the end of the bar helping it close almost at the low. It was also very close to the low of the LB bar. That looks like selling exhaustion with no result because no new low was made.
Now, if on Monday the market can break above Friday's high that would suggest a possible short-term up move. A long tail on an up bar is acceptable but if Monday is a down day, breaking below Tuesday's low, that would invalidate the current scenario.
There is a bullish short-term COT pattern in Sugar. However compared to Wheat the situation looks better because of the good uptrend, the seasonal bottom that is approaching and the accumulation which is picking up (green line). Additionally, a stopping volume appeared on a down day, after which the market was not able to continue down.
The price action picture is kinda similar to what we saw above for Wheat. After an up 1xN and down LB, Sugar is ready for a higher short-term low if Friday's high is penetrated.
The Australian Dollar futures (AUDUSD if you are a Forex trader) broke to new highs. That certainly sounds bullish. However, if you look closer you will see that for some time now both Large Speculators and Commercials are shorting the Aussie. But if the biggest traders are net short, then who is supporting the rally? Only the Small Speculators are net bullish and continue to add to their longs. And they are usually wrong!
Those in a combination with a seasonal top and a 0T followed by an inside 1xT might present a good short opportunity. For this to happen Monday should break below Friday's low, preferably with indicators showing distribution.
Something similar is happening with Canadian Dollar, Crude Oil and RB Gasoline. In all of them, the Small Specs are really bullish. Which might lead to good short opportunities.
Short-term COT bearish pattern in a combination with a seasonal top (blue line), a breakout to a new high again supported by the Small Specs suggest we should be on a lookout for bearish signals this week. The accumulation is also losing steam which supports the described scenario.
From a price action perspective, we have an LB followed by a 1xT. That is a short setup but I would prefer seeing a more complex signal. Something with price action catalysts and/or more days to form the setup.
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
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