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Will Soybeans Bounce Back from Key Support?


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TRADING COMMODITY FUTURES AND OPTIONS INVOLVES SUBSTANTIAL RISK OF LOSS ANDMAY NOT BE SUITABLE FOR ALL INVESTORS. YOU SHOULD CAREFULLY CONSIDER WHETHER TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR CIRCUMSTANCES, KNOWLEDGE AND FINANCIAL RESOURCES.

After the October 12th USDA WASDE report soybean futures spiked higher on lower ending stocks and a surprise lower national average yield. Since then however soybeans have given back most of the gains are now testing key trend line support. Will soybeans hold here and go on to test recent highs or will the bottom fall out?

The lower than expected national average yield and ending stocks on the October USDA WASDE report were a friendly surprise that sent soybeans sharply higher for the next two days. But, a number of factors have thrown a wet blanket on the rally and soybeans are now testing key trend line support. Soybeans have respected and held this trend line since putting lows in mid August. The last 5 times soybeans have tested it they have answered with a bounce, 4 out of 5 resulting in new recent highs.

While the WASDE report was surprisingly friendly there are a few reasons why soybeans have not been able to follow through to the upside. For one, there is significant US producer selling as we are in the middle of harvest. But, South American producer selling as picked up as well as the weakerBrazilian Real has made them more competitive on the global scale and producers see opportunities to get paid more (in Real terms). Partially because of this soybean prices in China have been on the decline. In the mean time Argentina has gotten more competitive with soybean meal sales putting pressure on domestic soymeal prices.

So where do we go from here? The answer will likely come in the next few days, but looking at a soybean meal chart it seems to be predicting failure of support in soybeans and lower prices to come. This is certainly not an exact science and if the technical traders (ie funds) come in and aggressively buy soybeans off support then we could see yet another bounce and a continuation of the trend. It will be interesting to see how this goes in the next few days.

Give us a call if you would like more info on the strategies we are using or if you would like to set up an account to put a plan in action. Ted Seifried - (312) 277-0113. Also, feel free to give me a call or shoot me an email if you would like to talk about your marketing plan, the markets, weather, or just to visit.Follow me on twitter @thetedspread if you like.

DecemberCorn Daily chart:

NovemberSoybeans Daily chart:

DecemberWheat Dailychart:

Producers looking to hedge all or a portion of their production may be rather interested in some of the options / options-futures strategies that I am currently using.

In my mind there has to be a balance. Neither technical nor fundamental analysis alone is enough to be consistent. Please give me a call for a trade recommendation, and we can put together a trade strategy tailored to your needs. Be safe!

Ted Seifried (312) 277-0113 or tseifried@zaner.com

Additional charts, studies, and more of my commentary can be found at: http://markethead.com/2.0/free_trial.asp?ap=tseifrie

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Futures, options and forex trading is speculative in nature and involves substantial risk of loss. This commentary should be conveyed as a solicitation for entry into derivitives transactions. All known news and events have already been factored into the price of the underlying commodities discussed. The limited risk characteristic of options refers to long options only; and refers to the amount of the loss, which is defined as premium paid on the option(s) plus commissions.

FOR CUSTOMERS TRADING OPTIONS, THESE FUTURES CHARTS ARE PRESENTED FOR INFORMATIONAL PURPOSES ONLY. THEY ARE INTENDED TO SHOW HOW INVESTING IN OPTIONS CAN DEPEND ON THE UNDERLYING FUTURES PRICES; SPECIFICALLY, WHETHER OR NOT AN OPTION PURCHASER IS BUYING AN IN-THE-MONEY, AT-THE-MONEY, OR OUT-OF-THE-MONEY OPTION. FURTHERMORE, THE PURCHASER WILL BE ABLE TO DETERMINE WHETHER OR NOT TO EXERCISE HIS RIGHT ON AN OPTION DEPENDING ON HOW THE OPTION'S STRIKE PRICE COMPARES TO THE UNDERLYING FUTURE'S PRICE. THE FUTURES CHARTS ARE NOT INTENDED TO IMPLY THAT OPTION PRICES MOVE IN TANDEM WITH FUTURES PRICES. IN FACT, OPTION PRICES MAY ONLY MOVE A FRACTION OF THE PRICE MOVE IN THE UNDERLYING FUTURES. IN SOME CASES, THE OPTION MAY NOT MOVE AT ALL OR EVEN MOVE IN THE OPPOSITE DIRECTION.



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About the author


Ted is a Vice President at Zaner in charge of the Zaner Ag Hedge Group.  He specializes in agricultural hedging employing various strategies using futures, futures spreads, outright options and option combinations.  He believes it is paramount to be able to use different strategies to adapt to market conditions.  Ted works with large to mid size grain and livestock producers and end users in North, Central and South America.  He also writes a blog on Agweb called “The Ted Spread”, frequently posts articles on Insidefutures.com and is often quoted in Reuters and Bloomberg.  
 
Please feel free to give Ted a call at (312) 277-0113, or shoot him an email at tseifried@zaner.com

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