Technically Speaking
Darin Newsom DTN Senior Analyst

Friday 11/08/13

Bullish Reversal in Jan Beans

The January soybean contract seemed to be biding its time early Friday, though minutes before the release of USDA's November Crop Production and Supply and Demand reports the contract quickly moved to double-digit gains. After the report was released, complete with a larger than expected production estimate, the January contract was freed from its shackles and it started running.

Source: DTN ProphetX

Take a look at the contract's weekly chart. Notice that this week saw the January post a new low for the recent sell-off of $12.47, a test of the 67% retracement level ($12.48) of the previous uptrend from $11.69 through the high of $14.06. Again, this was below the previous week's low of $12.50 1/4. Following the report the contract rocketed to a high of $12.97 1/2, taking out the previous week's high of $12.94 1/4 before closing 44 1/2 cents higher for the week.

Those familiar with this blog will recognize this action as establishing a bullish key reversal, meaning the secondary (intermediate-term) trend on the weekly chart has turned up once again. Confirming the action in the January contract, weekly stochastics (second study) also saw a bullish crossover with the faster moving blue line finishing the week above the slower moving red line (48.43% and 48.35% respectively).

While noncommercial traders continued to show mixed feelings for soybeans, Friday's CFCT Commitments of Traders report showed this group reducing their net-long futures position by 18,231 contracts through October 5, the commercial side of the market is growing more bullish. Note that the January to March futures spread (third study, green line) is testing price resistance at its recent peak of 21 1/2 cents, closing the week at 19 1/4 cents.

The initial price target is near the recent spike high of $12.87 3/4, week of October 21. However, given the continued bullish long-term commercial outlook, the January contract could make a run at technical price resistance pegged near $13.45 1/4. This price marks the 61.8% retracement level of the downturn from the $14.06 high through the recent low. Key will be how the market acts early next week as it possibly approaches the $12.87 3/4 mark, and if both commercial and noncommercial traders show more interest as next week progresses.

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Posted at 3:04PM CST 11/08/13 by Darin Newsom
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