Soybean Correction Due
By John Booth, Archer Financial Services
Look for a drop in soybean prices to 11800. See the November bean chart, which has been trading in a price range between 141100 and 12400 going back to February 10, 2011. The quadruple top, coupled with an RSI that reached 83.88, portends a market poised for a drop.
Chart provided by APEX
This looks to me like a tired, old bull market that has become over-bought, having digested all of the bullish news. I believe it would take some extraordinary news to take soybeans above the current top.
A correction is perfectly normal, but always seems to be a surprise, for two reasons.
1. Most traders prefer the long side, and
2. One would be hard pressed to find bearish news at market tops, just as it's hard to find bullish news at bottoms.
In addition to the reasons cited above, a decline could be triggered by the above normal rainfall predicted during the next two weeks in the important bean growing areas. Hot temps with ample moisture will likely boost crop prospects. Also, the US Dollar appears to have found a bottom and could rally back to 77000.
Always protect positions with stop-loss orders or buy options to limit risk. Note: I believe corn should be sold and wheat should be bought.
Chart provided by APEX
Please call me at 1.312.242.7933 or send an email to john.booth@archerfinancials.com to discuss these or other markets.
Best wishes for successful trading.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The views and opinions expressed in this letter are those of the author and do not reflect the views of ADM Investor Services, Inc. or its staff. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright © ADM Investor Services, Inc.
