Kansas City/Chicago Wheat Spread: Reentry Parameters Were Elected

Jumping Back In

After the last attempt at the long side of the KC/Chicago wheat spread failed, the blog issued a setup to reenter if the March spread made a close above the declining 75-day Moving Average. This happened today.

The hypothetical long spread position was entered at -2 3/4 cents (premium CBOT wheat) by purchasing the March Kansas City wheat contract at $4.72 3/4 and selling one March Chicago wheat contract at $4.75 1/2. Initially, we are going to risk a two-day close below -29 cents (three cents below the contract low). Coincidentally, this is near the July and August lows on the nearest-futures chart.

March 2016 KC Wheat Chicago Wheat spread daily (75-day MA)

March 2016 KC Wheat Chicago Wheat spread daily (75-day MA)

The close above the 75-day MA for the first time since May signaled a bullish trend change. If the nearest-futures KC/Chicago wheat spread can now close back above the ‘even money’ mark for the first time since late June, it should confirm that the bottom is finally in.

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