Technically Speaking
Darin Newsom DTN Senior Analyst

Monday 04/07/14

Nov Beans at Key Point

One look at the weekly chart for the new-crop November soybean contract and a number of technical factors jump out at you. First, the contract itself is locked on tight to resistance near $12.10 3/4, a price that marks the 50% retracement level of the previous downtrend from $13.33 through the low of $10.88 1/4. This after posting a bullish outside week last week (the contract traded below the previous week's low, above the previous week's high, before posting a higher weekly close).

Source: DTN ProphetX

Meanwhile, weekly stochastics (bottom study) are showing the market to be overbought above the 80% mark and poised for a possible downturn. Also, the carry in the November to January futures spread (second study, green line) continues to hold near the 4 1/2 cent level, reflecting a bullish commercial outlook toward new-crop soybeans.

So what can we make of all of this? The combination of last week's bullish pattern (bullish outside week) and still bullish futures spreads should spark an extended rally to test resistance between $12.39 1/2 and $12.51 1/2, prices that mark the 61.8% and 67% retracement levels of the previously mentioned downtrend. This would fit with the five-year seasonal index for November soybeans (not shown) that shows the contract tends to rally 11% from the first week of April (last week's close) through the end of August.

However, noncommercial traders could start to back out of the market given the overbought look to weekly stochastics. That could make it difficult for the contract to push much above the upper retracement levels initially.

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Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.

Posted at 8:24AM CDT 04/07/14 by Darin Newsom
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