Sneaky Oat Bulls Kept This One Quiet!
A solid month for Oats! Sneaky Oat bulls have enjoyed a very rewarding month, but will it last? Oats tapped out at dual resistance yesterday at (1), where inside trendline (A) and 50% Fib levels cross (1) taken from the highs of March 2014 and the lows of August 2016. A yearly rising wedge (bearish reversal) pattern (A & B) in this monthly time frame stands out a mile, and the bears are just hoping this wedge pattern continues to form. They might be in for a bit of luck, at least for the short term. The wedge is perfectly located at the bottom of a trend that began back in early 2014, which tends to perform better. And with overbought signals screaming at us on the lower daily time frame, we can expect at the very least a breather from this relentless rally.
However to confirm this breather, we need to zoom in on the shorter Daily time frame to get a closer look at where we are now.
As you can see this double top pattern (1 & 2) has been breached (red eclipse) shown on this daily time frame (above). A convincing break below (3) would be necessary for confirmation that a wave of selling pressure is present. Alternatively if support holds at (3) we can assume this uptrend is still intact.
What Drives the Price of Oats?
The 4 main drivers of Oats prices are:
- Supply and Demand
- Global Production
- Weather Conditions
- Underlying Price
Generally speaking, supply and demand, global production and consumption differ slightly from year to year. That being said these slight differences do cause price volatility, mainly due to competing feed grain prices. Usually with agricultural commodities the weather plays a big part in price fluctuations. But unlike other agricultural commodities, weather conditions don’t necessarily affect the underlying price of Oats. And that’s simply because production is widespread, with Europe being the largest producers followed by Russia and then Canada. So if one region experiences poor weather conditions, It’s usually offset by better weather conditions elsewhere.
So to wrap it all up, Oats is regarded as a bullish commodity and prices are likely to rise in the future due to many factors (not all mentioned in this article). For short term speculators, I would suggest monitoring price action over the coming days before making a decision to buy or sell. Investors already committed to this soft commodity I would recommend holding your ‘long’ positions (providing your in it for the long haul). And for Mid term swingers, again I would suggest monitoring price action around this short term support zone (Daily Chart at 3) and or long term resistance (Monthly Chart at 1).