Soybeans - Bullish signs across complex

[DaveT]

Let's look closely at the long-term charts.

Chart #1 :
Soybeans Quarterly shows key reversal bar just completed.

Chart #2
:Soybeans Weekly (nearby) shows tight Volatility Squeeze (Bollinger Bands/Keltner Channel)

Chart #3 :
July Soybeans Weekly Continuous Log shows large wedge/pennant almost breking out.

Chart #4
:SoyOil Monthly shows Volatility Squeeze + Reversal negating the small Head & Shoulders Reversal pattern ( RE-BREAK)

 

[DaveT]

Drilling down to the daily, I will focus my attention on the July 06 Soybeans, as this gives enough of a long-term view to include the entire Bullish Seasonal from Feb through to June.

Main points:

1) Large Breakaway Gap in December signalled end of downtrend - to new uptrend?

2) Correction underway (as of 6th Jan) - Indicated by the divergence to CCI indicator.

3) Support at 620, then the 40 DMA at 608.

3) Minor uptrend line from lows also possible support (same area)

4) Gap remains at 590-600. If a true breakaway gap, it need not be filled.


I am looking to go long July on evidence of support, (as indicated above), plus some intraday stuff pertaining to my system.

IMO.

 

[hornblower]

Dave
looks good to me
well spotted
good luck with it
kind regards
Hornblower

 

[TWI]

The beans look interesting but if I look at the fundamentals for a minute I see following flags to the long story
05/06 US exports down 28% year/year
05/06 US ending stocks 405m, 14% stocks/use, largest in 11 years.
Global ending stocks 22% annual use
S.Am est production in 06 +10% y/y

I do like these products when technicals and fundamentals reflect the same story, I am not sure that in Soy they do, the best option may be to catch the upside of any S.Am crop weather market.
Personally I still favour Oil due to the flatter structure and I continue to actively scale in on dips out on rallies with some success over the last few months.
Good luck DaveT, I have appreciated in the past that your analysis is usually correct.

 

[DaveT]

It's USDA January Report tomorrow (thurs 12th Jan) and the pre-report estimates for Soybeans are bearish, with record stocks and carryover figures being touted.

I will still be looking for a suitable LONG entry point sometime in the next few weeks.

Technically , the question is whether we make a higher low or form a double bottom to the late November low . (I doubt we will see new lows)

Let's see what the USDA Supply/Demand report brings, or more importantly what the reaction is , in the market and on the charts....

 

[DaveT]

Entered LONG July Soybeans today at 588.
Risk down to 560.
Targets = 630,640,650 Res. INITIALLY.

Technical Rationale

1) Oversold conditions, and possible exhaustion GAP closed today.
2) Higher high, higher low bars from previous 2 days - often a bottoming sign after decline.
3) Support at 585.
4) Seasonal low due By Feb (Ideally - can be earlier).
5) Intraday techncials signal possible bottoming action (Bollinger squeeze 90-min)


Fundamental Factors

1) Bearish Supply/Demand figures now discounted?
2) Firming Basis as farmer sales dry up due to low prices.
3) Bullish Sales data out today (3*avg sales)- demand from China returning.
4) Possible hot weather to build back into South America growing regions.

 

[DaveT]

Brazil Soybeans growing conditions are turning hot, dry and stressful.

The bean market could build in a weather premuim again by February, as was the case last year, if this situation perpetuates...

International Weather: Limited Moisture In Brazil


BRAZIL: Mostly dry, warmer-than-normal weather (temperatures averaging 2-4 degrees C above normal, with highs in the lower and middle 30s degrees C) returned to major agricultural areas in the south and southeast (Rio Grande do Sul to Minas Gerais), limiting moisture for normal development of soybeans and corn and maintaining high moisture demands of other crops, including citrus and coffee. January and February are critical months for summer crop development, as most soybeans and corn advance through their respective reproductive and filling stages of development. An immediate return to normal weather conditions is vital for the realization of current yield prospects. This is especially true for Parana, Brazil's second largest producer of soybeans, where conditions are worse than this time last year. Elsewhere, beneficial rain (25-100 mm or more) continued in key soybean areas of the center-west (Mato Grosso, Goias, and Mato Grosso do Sul) and much of the northeastern interior, including Tocantins. However, mostly dry weather dominated Bahia and other states along the northeastern coast, maintaining high moisture requirements of cocoa, sugarcane, and coffee.

 

[DaveT]

Re: Soybeans possible significant low formation:


A look at the products (particularly SoyMeal) shows up further evidence of potential bottoming action. It compares well to the similar double bottom in Coffee back in December.

Chart #1: Soymeal NEARBY continuation chart showing double bottom + Bullish Divergence.

Chart #2: Coffee (Mar) chart showing double bottom + Bullish Divergence in December.

 

[smbtnt]

Soya

Hello DaveT,

I have been keeping an eye on soya as it approaches previous lows, its not the cleanest of charts, currently anticipating a bounce off yellow zone or preferrably a reversal candle to enter longs, ideally supported by a reversal on the weekly ( which has formed an inside bar), If this goes without me i will not be too concerned.

 

[DaveT]

Soybeans look good for the opening call Monday.

In the overnight (e-cbot), July was UP 7.5.

Looks like the trade noticed the S. American heat returning, and/or the technical bottoming.

 

[DaveT]

Good open today in the Beans as expected.

Having entered at 588 on Friday (previous trading day), the July beans opened today at 594

On the intraday charts (esp 90-min) a bollinger Squeeze was set-up on Friday, plus bullish momentum divergence.

Short-term targets are 630,640,650 resistance, but first the GAP left from 617-629.

 

[DaveT]

Out of July Soybeans at 593.

Late reversal today looks ominous.

Soy has stuggled to match the Corn and Wheat Rallies - a reflection of the weaker fundamentals?

Flat for now. Tough markets of late.

 

[TWI]

Certainly are real donkeys. I am trading corn wheat spread, there is substitution between these products in feed so selling it scaleup from 115. I have not been able to do more in beans than start buying N6/X6 and running the BO long which doesn't make much progress.
Now, how about a cocoa long here?

 

[smbtnt]

Soya looks good to go, 5800 broken upside and tested (mar).
1st target 6200.

 

[smbtnt]

Hi Guys,

Anticipating a rally this week on soya, technicals look sound but not too keyed up on the fundamentals, anything one should be aware of?

 

[cs00nnb]

Seasonals show that soy beans tend to do nothing untill end of Feb. From then on, it does very well.
However, at current cheap prices, is there any harm in stocking up now and holding on for some time into June/July? I dont think there is any harm.
Knowing my luck, i will prob get burnt in short term, but long term Im bullish on Soybeans and im getting in.

 

[TWI]

The only thing that is going to get this market into any sustained uptrend is a severe weather situation. All the upside we see right now is spec money getting excited by fresh highs. So Argentina is a little dry right now and the entire complex is getting some support but there is still a monster crop likely in US this year and stock are still enormous and the farmer will price on any decent upside. The story simply is not good here. Of course it doesn't mean you cannot make money by just trading the technicals but be careful out there, this can come off very fast.

 

[smbtnt]

Maybe someone can help me understand the chart and the comments which were posted in another forum.

The N/X bean spread, which I was taught many years ago, is a great leading indicator for beans. The spread--below--has yet to close above that Nov 30 low, so as of yet I'm not a believer in a bean rally.

 

[TWI]

The N/X spread is a the main old crop/new crop spread. I am long it now as I like these levels and it is a safer way to play the long side for weather issues during the US growing season Apr to Oct. About the most it will go out to is a 20c carry as this would imply carrying stock all the way from Jul-Nov but more often than not it goes inverted as there are often weather markets during US growwing season which casts doubts on the new crop harvest date and so starts to price risk of old crop having to supply for longer until new crop comes in. With the high c/o stx this year there is no danger of running out of beans but the spread is still a good bet IMO. The comment above is correct although it tends to follow rather than lead in my experience i.e. when beans are bullish the spread rallies (backs) when bearish it comes off (contango increases). Definitely worth keeping an eye on.

 

[cs00nnb]

The only thing that is going to get this market into any sustained uptrend is a severe weather situation. All the upside we see right now is spec money getting excited by fresh highs. So Argentina is a little dry right now and the entire complex is getting some support but there is still a monster crop likely in US this year and stock are still enormous and the farmer will price on any decent upside. The story simply is not good here. Of course it doesn't mean you cannot make money by just trading the technicals but be careful out there, this can come off very fast.

Your analysis is probably accurate, and may serve good advice to those who looking to swing trade this. But if soybeans dont do anything this year, I will continue holding untill we have higher prices (this may happen 2006, 2007, 2008??) or may not happen. But I will hold on.
One thing for sure, Soybeans are a cheap asset atleast on a relative basis to the other commodities. Given that these are the early stages of the commodity bull market, the probabilities are in favour for more upside over the long term.