Kansas City/Chicago Wheat Spread: Roll to the December Contracts

Goodbye Labor Day, Hello Christmas!

The IMC blog is holding a long position in the September Kansas City/Chicago wheat spread.  It was entered at -13 3/4 cents (premium CBOT wheat) on July 6th.  An ‘add-on’ position was entered at +6 1/4 cents (premium KC wheat) on August 26th.

With the First Notice Day for the September grain contracts hitting on Wednesday, it’s time to roll the position to the December contracts.  Fortunately, the December spread is only a couple of pennies higher than the September spread.  Based on what has transpired in history, there should be at least another 20 or 30 cents of upside from the current levels.

December Kansas City Chicago Wheat spread daily (30-day MA)

December Kansas City Chicago Wheat spread daily (30-day MA)

The December KC/Chicago wheat spread signaled a bullish trend change in early July.  Since then it has made a series of higher highs and higher lows.  In addition, the spread has closed above the rising 30-day Moving Average every day for the last several weeks.  Therefore, we will continue to hold the initial position and the pyramid position as long as it continues to hold above the 30-day MA.

Trade Strategy:

On the long September KC/Chicago wheat spread that was entered at -13 3/4 cents (premium CBOT wheat) and the long September KC/Chicago wheat spread that was entered at +6 1/4 cents (premium KC wheat), roll to the December contracts at the market-on-close on Monday, August 29th.  Risk the two December spreads to a two-day close below the rising 30-day Moving Average.

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