Wheat spread trade

Pavel Hála | Trading ideas | 13. 2. 2013

I’m watching one CBOT wheat interdelivery spread. It’s ZWZ13-ZWN13. Seasonality is pushing the spread up:


ZWZ11-ZWN11 was an abnormal year and it’s distorting our chart. Luckily in our app you can interact with charts and that includes our seasonality analysis. If you click on the ZWZ11-ZWN11 in the legend or the little orange square besides the writing, the ZWZ11-ZWN11 line will disappear from the chart and whole chart will rescale. After doing so you you will discover the spread is moving in a wide channel showing seasonal uptrend.


This year’s spread is currently near the middle of the channel. What makes me believe to enter the trade now is the technical pattern that has developed since mid december. I would say it’s a flag pattern which is about to break higher. Therefore I can safely place a stoploss somewhere below 20c that would limit my potential loss. This creates a trading opportunity with nice RRR (risk-reward ratio). See for yourself:


And as you can see from our volume analysis the spread is also very liquid. And has months to expiration.


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