Technically Speaking

Channeling July Soybeans

Source: DTN ProphetX

Ag markets never sleep, and neither do those who watch them. This point was made again late Sunday night when a question came to me via Twitter just after midnight (CT) Monday morning. The questioner asked, "Seeing a descending channel on daily soybeans?"

A great question, playing into the discussion recently in my weekly "Technically Speaking" updates. Soybean charts (weekly and daily) are becoming littered with technical signals, mostly bullish, that have failed. The daily chart for the July contract, at least for now, is no different.

P[L1] D[0x0] M[300x250] OOP[F] ADUNIT[] T[]

First, the questioner's interpretation is correct. Connecting the first two highs dating back to November 12 and December 10 ($10.97 and $10.78 respectively) establishes trendline (solid red line) that the July contract has not been able to substantially penetrate since. Yes, there have been times (late-December 2014 through mid-January and late-February through early March) when the contract tried to break resistance but soon fell back below this trendline.

Take note of daily stochastics (bottom study). The contract saw an initial bullish crossover (first green circle, faster moving blue line crossing above the slower moving red line with both below the oversold level of 20%) in conjunction with the spike rally of February 3. The subsequent rally led to the later break of trendline resistance, but a stronger uptrend failed to materialize. Take another look weekly stochastics and see that the contract turned lower with stochastics below the overbought level of 80%.

A technical reading would say that the uptrend indicated by the previous bullish crossover never actually came to an end. Yet the contract moved to a series of new lows, the latest being $9.49 on April 10. You'll also see that daily stochastics established a confirming bullish crossover (second green circle) below 20% on March 18 that also failed to generate much buying interest.

Analysis of patterns in daily stochastics as we start a new week suggests the contract should see a minor (short-term) uptrend. July beans tested initial resistance of $9.79 (high from April 15, dotted red line) with its overnight high of $9.78 3/4. If the contract is able to push through this level it could immediately find selling at trendline again. Beyond that is the high from April 2 of $9.97 1/2 (dashed red line). A test of that price would likely have daily stochastics near or above the overbought level of 80%, setting the stage for a possible bearish turn.

But what about the downside? If July beans fail to break through initial price resistance and fall back once again, trendline support (green line, connecting the lows $9.35 1/4 from October 1 and $9.49 from April 10) is near $9.50 through Friday's close.

To track my thoughts on the markets throughout the day, follow me on Twitter:www.twitter.com\Darin Newsom

P[] D[728x170] M[320x75] OOP[F] ADUNIT[] T[]
P[L2] D[728x90] M[320x50] OOP[F] ADUNIT[] T[]

Comments

To comment, please Log In or Join our Community .