A strong rebound in the prices of many commodities over the past several months has triggered long-term buy signals on many charts. However, fundamentals such as bumper crops and weakening global demand have meant that agriculture has been moving in the opposite direction and looks poised for a continued move lower. In the article below, we’ll take a look at the charts of several agriculture-related assets and try to determine if there is a chance for a rebound. (For more, see: How To Invest In Farming Without Owning A Farm.)

PowerShares DB Agriculture Fund

When it comes to trading agriculture commodities, one of the most popular products is the PowerShares DB Agriculture Fund (DBA). Fundamentally, this fund’s managers seek to track changes of the DBIQ Diversified Agriculture Index ER, which means it is comprised of futures contracts on some of the most liquid and widely traded agriculture commodities such as soybeans, coffee, corn, live cattle and wheat. Taking a look at the chart, you can see that a well-defined head-and-shoulders pattern has taken shape. Active traders would use this common price pattern to suggest that the prices of many agriculture commodities are gearing up for another move lower. Traders will keep a close eye on the neckline of the pattern, which is shown by the dotted trendline because the recent close below followed by the failed attempt to move back above suggests that the momentum is still in favor of the bears. Bearish traders will likely look to protect their short positions by placing a stop-loss above either the trendline or the previous high of $21.06. (For more, see: Watch Out for Agriculture Stocks)

Teucrium Wheat Fund

Commodity traders who have bet on a reversal of the downtrend in recent years have been consistently disappointed. Taking a look at the five-year weekly chart of the Teucrium Wheat Fund (WEAT) below, you’ll notice that the price of wheat has been trading within a defined downtrend as shown by the descending trendline. Notice how the dotted line has acted as a consistent level of resistance on each attempted move higher. Active traders would expect this behavior to continue and will likely continue to add to their short positions as close to the trendline as possible. Traders will likely maintain a bearish outlook on wheat prices until the price closes above either the dotted trendline or the 200-week moving average (red line) depending on risk tolerance. (For more, see: A Primer For Investing In Agriculture.)


Coffee prices have trended higher over the past several months, which has many traders excited about a possible long-term trend reversal. However, by taking a step back and checking out the 3-and-a-half-year weekly chart of the iPath Bloomberg Coffee Subindex Total Return ETN (JO), you can see that the 200-week moving average (blue line) has acted as a strong level of resistance and is in control of the direction of the overall trend. Based on this long-term chart, traders will want to turn cautious of a pullback as the price nears the resistance, which is currently at $26.62. (For more, see: Unique Ways To Profit From Coffee.)

The Bottom Line

While recent buy signals in many of the commodity markets have traders excited to jump back into a position, factors such as bumper crops in agriculture commodities combined with weakening global demand have pushed the prices lower. Based on the charts discussed above, it is clear that the bears are still in control of the momentum, and there are many significant long-term resistance levels that stand in the way of a true long-term reversal. (For more, see: These 3 Charts Suggest Bears Control The Commodity Markets.)



Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.