Trading in a crisis can feel a little tricky.
News flows fast… fake news flows faster.
(To be fair, there’s always a crisis in the markets — it’s just that some crises are bigger than others.)
With the invasion of Ukraine last week, the inflationary concerns we’ve been discussing for months have started to accelerate.
It can seem nearly impossible to guess where they are headed…
Unless you have a Market Roadmap.
Take wheat futures, for example. We are seeing a massive ramp in agricultural commodities as Ukraine is known as “The Breadbasket of Europe.”
Here’s a list of wheat production by country:
I don’t know how much of that wheat China and India are exporting, but my guess is they’ve got huge populations to feed — so probably not much.
Then you’ve got Russia at number 3, and they just got kicked out of SWIFT… so they’ll probably be selling to China.
(Oh, and the Pakistani Prime Minister, Imran Khan, just announced Pakistan will be importing about 2 million tons of wheat and some natural gas from Russia.)
And then you have Ukraine at number 9. Given the circumstances, you’re probably not seeing a lot of tractors running right now.
A supply reduction at the margins can lead to massive spikes in wheat prices.
The question is…
Could we see a reversal anytime soon?
We can use our Trading Roadmap as a guide and go all the way back to 2008:
Wheat Prices Chart
We’re focused on the 1-day Volume Weighted Average Price (VWAP) on those price spikes.
Let’s put some lines for those:
Wheat Prices Chart with VWAP Price Spikes
Now, let’s zoom out and take a look at the weekly chart:
Wheat Prices Weekly Chart
Given the parabolic blowoff action, the 1058-1123 zone between 3 is a good place to start looking for a fade.
You may not want to trade Wheat Futures, but you can use an ETF as a proxy: WEAT. The options board is very liquid right now.
Now, If you feel like you missed the boat on the commodities run…
Don’t worry — there are other places to look.
Take a look at this chart:
Wheat price chart
After compressing for a few months…
It’s starting to attract more buying interest. If prices continue to be accepted here, then it’s very possible we start to kick off a 40-60% run.
This week, we’re sending a trade setup to our PVA members for this commodity that’s just getting started.
Here’s a long term price chart of this commodity:
Wheat Long Term Price Chart
Needless to say, a quick 40-60% on the fund’s value is very possible….
And I believe this is a good one to just “tuck away” for a while if you think the commodities run isn’t over.
