Palm Oil - hinting at Soybean Rally in 2006?

[DaveT]

Palm Oil prices(Malaysian) essentially track SoyOil, which is a product of Soybeans.

Sometimes, therefore, the chart of Palm Oil can give clues to the probable timing and direction of a move in the Soybeans, particularly as the Palm Oil market is probably smaller/thinner than the US grains, and the chart can appear cleaner, with clearly readable moves and ranges.

One of the major components of my trading system is to look for 'Volatility Squeezes' using Bollinger Bands, sometimes with the Keltner Channel, plus a momentum-type indicator.

There is curently a MAJOR Volatility Squeeze (ie. contraction of the bands) on the Monthly and weekly charts of Palm Oil. There are also mild contractions on the Soybean charts, too. In the case of Palm Oil, the monthly squeeze is the tightest since the charts began (1997)

Such 'squeezes' invariably portend a large move, when the breakout occurs.

So my conclusion is, watch Soybeans( via Palm Oil )for a good move UP in the first half of 2006.

In the shorter term, the Soy complex needs to correct down from overbought status on the daily. At the first signs of re-bottoming, I will be looking to establish a position in the July 06 beans.

 

[TWI]

I already have position in Bean Oil, have been running a scale there for a few months. Still 4 levels deep after last weeks rally and have taken a good few oscilation profits along the way. I do prefer the oil leg for scaling as it has a flatter structure and the inevitable rollovers are cheaper here. Looking at the current crush margin ~$1 it favours being long beans over products in an outright position for sure.
I had not noticed the contraction on the palm oil chart, thanks for the pointer. Palm still prices in against Soyoil but I was suprised to see meal getting all the attention in the recent runup in the bean complex what with all those hipro meal eating chickens and bird flu issues.