Technically Speaking

Feeling somewhat left out following Wednesday's blog post regarding new-crop December corn quietly growing more bullish, the new-crop November soybean contract flexed its muscles Thursday. The contract bulled its way to a new four-week high, easily eclipsing the $11.29 mark from the week of January 13.

Traditionally, a move to a new-four week high signals the beginning of an uptrend. In the case of November beans, this bullish turn would seem to confirm a bullish crossover by stochastics (bottom study) way back in early November. The fact that the contract has struggled to rally since this crossover occurred would suggest that a potential rally could be limited.

Thursday's high of $11.38 1/4 is near the low end of a projected target range between $11.40 and $11.80, the latter approximately the 38.2% retracement level of the previous secondary (intermediate-term) downtrend from $13.33 (high the week of September 10, 2012) through the recent low of $10.88 1/4 (week of January 27, 2014). Note that the $11.40 level (dashed red line) is near the low end of a previous pocket of trade, with the midpoint ($11.60) represented by the dotted red line.

Given that the new-crop November 2014 to January 2015 futures spread (second study, green line) is showing only a 4 1/4 cent carry, reflecting a bullish commercial outlook, the upside target could be raced to the 50% retracement level near $12.10. If fundamentals continue to grow more bullish, the upside target for new-crop November beans becomes $12.39 1/2.

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