SOYBEANS - Heatwave US Midwest Jul 06?

[DaveT]

Attention grain/Soybeans traders -


There is an expansive HEATWAVE forecast to come later this week (ending Jul 14th 2006) for much of the US - including the Corn Belt and eastern US, eventually.

This will, if it comes to pass, probably produce a good powerful rally in the Corn and Beans.

I like the Soybeans myself - the techncials look VERY promising for a strong breakout NORTH any time now. This pending heatwave gives me the POSSIBLE fundamental back-up to what I see in the technical picture.

I am LONG November Soybeans right now (from 631). Targeting 710 (NOV) later this summer, or early 'fall'. Could be a very good POSITION trade to hold through July and August.

We'll see.

Here are my charts:

1) November Soybeans Daily:

2) SOybeans Weekly

3) Soybeans Monthly.

 

[DaveT]

Check out the US HeatWave forecasts here:

http://headlines.accuweather.com/news-story.asp?partner=accuweather&myadc=0&article=1

Will it happen?

 

[timaru69]

Check out the US HeatWave forecasts here:

http://headlines.accuweather.com/news-story.asp?partner=accuweather&myadc=0&article=1

Will it happen?

Hi Dave T

Interesting analysis

May I ask how far from entry do you run your stops?

Cheers

 

[DaveT]

Hi timaru69 -

My stops are run quite wide for these kind of position trades - especially with the increased volatility that Soybeans can show at this time of year. (One has to sleep at night!)

My stop on November is down at 583 (48 points below entry).

Now then, Soybeans daily limit is 50 points - so theoretically they can move 50 points either way, in a single day. (Limit moves have been seen during 'weather markets')

But with the techncal support I see on the daily and weekly charts, there is a very low probability of seeing a 50-cent move down, whether in one day or a week...IMO.

Anyway, if they do move up ,say,30 cents or more I will bring the stop up to Break-even

Note that SEASONALLY, Soybeans do tend to move LOWER from July through to harvest - that is on 'normal' growing weather.

However, in a 'drought' year, or significant weather scare, the resulting COUNTER-SEASONAL move can be VERY powerful.....

 

[DaveT]

Another technical study I like to use is the 'Volatility Squeeze'.

This happens when the Bollinger Bands close in on the (overlaid) Keltner Channel.

When this happens, you can expect a powerful breakout to occure sooner or later - and the longer the 'squeeze' goes on , the more powerful the resulting move.

See here in the Weekly Soybeans chart, a very prolonged 'squeeze' of the bands.

 

[DaveT]

DJ Technical Special: CBOT Soy On Verge Of Bullish Breakout


By Jim Wyckoff

Of DOW JONES NEWSWIRES


November soybean futures at the Chicago Board of Trade on Tuesday morning
gapped higher on the daily bar chart and hit a fresh six-month high of $6.39
1/2 a bushel. However, prices quickly backed off the high as the bears were
attempting to and did close Tuesday's opening upside price gap on the daily
chart.

The soybean bulls are on the verge of producing a bullish upside "breakout"
from a very choppy trading range on the daily bar chart, dating back to the
April low of $5.85 1/2. A high-range close Tuesday could be the beginning of
that upside breakout for which the bulls are seeking and for which would
suggest still more upside price potential in the near term.

The next upside price objective for the bulls is to produce a close above the
January high of $6.48 1/2. That feat would open the door to a challenge of the
contract high of $6.60, basis November futures.

However, a low-range close on Tuesday would be an indication that buyers
became exhausted after only poking prices above the recent wide and choppy
trading range. It would also mean Tuesday's high of $6.39 1/2 is now very
strong overhead resistance for the bulls to overcome, and that prices are
likely to drift back down into the recent trading range on the daily chart.

A move in November soybeans below solid technical support at $6.12 1/2 (which
would fill on the downside an upside price gap on the daily bar chart) would
deflate the bulls and would suggest prices moving back down into the lower
portion of the trading range on the daily chart.


-Jim Wyckoff is a technical analyst and the proprietor of the analytical and
educational advisory service, "Jim Wyckoff on the Markets." He does not trade
commodity futures. His email address is [email protected]. Phone:
1-319-277-8643).


(END) Dow Jones Newswires

07-11-06 1059ET

Copyright (c) 2006 Dow Jones & Company, Inc.

10:59 071106

 

[DaveT]

Here's a good weather report featuring the coming US heatwave, and a breakdown of the effects on the nations crops is included.

Date is July 11th 2006.

http://wwwa.accuweather.com/news-weather-headlines.asp

If the page updates, here is the text:

A dome of high pressure aloft centered over the Four Corners region will be expanding eastward across the country in the coming days. This dome of high pressure combined with the jet stream's shift to the north will set the stage for the spread of intense heat across the country. Most areas will not only experience some of the hottest temperatures of the year, but also the most prolonged stretch of heat so far this year.

The hot air responsible for this heat wave will originate in the Desert Southwest. On Wednesday, the mercury will climb above 100 across the Dakotas, with widespread 90s elsewhere across the Plains and into Minnesota and western Iowa. High temperatures will continue to flirt with or surpass the century mark across the Dakotas through the rest of the week.

AccuWeather.com is forecasting that by Thursday afternoon, the RealFeel ® temperature will exceed 100 degrees across the country, with the exception of New England and the Pacific Northwest. Every state will be over 90 degrees, with the exception of Maine, New Hampshire, the "small states" and Washington state.

The forecast for Pittsburgh, PA could put tonight's Major League Baseball All Star Game in jeopardy. Last night, the showers and thunderstorms that moved into the Northeast bypassed PNC Park, where fans enjoyed perfect conditions for the All Star Home Run Derby. The 77th Midsummer Classic may be played in less than classic conditions. The first pitch is scheduled for around 8:40 p.m. EDT. This evening's forecast for Pittsburgh calls for mostly cloudy skies with a couple of showers and a thunderstorm.

Many areas of the nation have received more than their fair share of precipitation this month, while others will welcome any rain. Through Monday, the haves and have-nots include:
Beaumont, TX - 9.41"
Corpus Christi, TX - 4.37"
Lake Charles, LA - 3.24"
Cape Hatteras, NC - 0.79"
Providence, RI - 0.52"
Portland, ME - 0.06"
After enduring deadly flooding rains in late June, much of the Northeast and New England has seen a dramatic turnaround over the first ten days of July. Many centers across the region are reporting rainfall amounts that are well below normal for July.

The lack of rain across the Plains States is having a major impact on farmers. Senior Meteorologist Dale Mohler says many areas have received no significant rain this month, and there is no widespread rain in the forecast for the next six to ten days. The price of wheat and oats is already high, and according to Mohler, the ongoing drought conditions will keep the prices high.

Commodities traders are also concerned about the corn crop. Crops in as much as 15 percent of the Corn Belt are stressed because of the lack of rain; however, the Iowa Department of Agriculture and Land Stewardship released a report on Monday that shows parts of east-central Iowa have received excessive amounts of rainfall. The agency also reports a sharp decline in the conditions of corn and soybeans over the past week. Iowa is the nation's largest producer of both crops.

The North Dakota Agriculture Department reports a similar situation. The agency says there is no surplus topsoil moisture and the development of all crops is below average. The situation is getting so bad that some farmers have been forced to sell their cattle or move them out of state because of a lack of grazing.

 

[chindl]

Good post Dave, I've been long Soy for a few days now as my techs were pointing higher and I noted the potential for the weather to have an impact, although it did forecast rain over the weekend and into the early part of the week, whch duly arrived, it has been on the cards for a week or three that there would be some weather problems in the belt this year. That's a wide SL you got there though Dave, would somewhere in the region of 610 - 615 not be more appropriate?
Been a good move on Bean Oil this last week or two as well, very profitable.
Chris

 

[DaveT]

Thanks, chindl -

Re. my stop,

-1) there is a gap left open on the November from 612-618, so I have factored in a (low) probability of that gap being filled before the breakout.

2) Below 590 would technically be a breakout DOWN of the daily triangle (see daily chart).

3) This is a 'spread-bet' trade, (of size eqiuvalent to 9 futures contracts) so I'm factoring in my (controlled-risk) spread (5pts with IG).

4) As a result of the above, I want to be able to sleep soundly at night while the E-CBOT night session gaps and jumps around in here!

 

[Pippppin]

DaveT.......any thoughts regarding the current soybeans situation?

 

[TWI]

Only thing worth a damn in that complex is beanoil. Low carry and lot of hype re: Biofuel spread to Diesel. No doubt beanoil demand is increasing y/y but there is a lot about spot, plants are being constructed right now to increase demand by ~100% but this will be 2007/8 crop, not this year. Still, you gotta go with the flow not against it.

 

[DaveT]

Guys -

Well we are still stuckin this long-term trading range on the Weekly for Soybeans.

Currently finding good support at the lower end Basis November.

The USDA August Report is due out on 11th August.

Those estimates should tell us if the heatwave(s) over the Midwest have eaten into yields or not..

Holding my longs for now - I think we can trade back up to the 630-640 area this month - A break above that and the weekly breakout will appear.

Below 590 (Nov) would negate the 2006 trendline.

 

[Pippppin]

Soybeans no longer finding good support.........

Trading the grain markets based on long-term weather forecasts (and market misinformation/propaganda) is fraught with difficulty. Much better, IMHO, to trade on long term supply/demand patterns