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Consolidation Break Imminent in the Soybeans


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Strategy of the Day 1.15.2020

Consolidation Break Imminent in the Soybeans

March 2020 Soybean futures are trading down 4.5 cents as of writing this report, with not much new price action to speak of over the last two weeks. With the entire ag complex hanging on Phase One deal signing, which President Trump is due to sign any second, the markets seem to be waiting for a catalyst currently. It is worth noting, once again, where some of the key technical levels are for the soybean futures, as there is a very consolidative range being drilled out in the market at this time. I have been very vocal over the last several months, on the importance for soybeans to re-establish price back above the range highs (960ish which has been tested three times since last spring) if a sustained longer-term reversal is underway. As of now, we find the March 2020 soybean contract embattled in an approximately 20 cent range to start 2020, with that range tightening to around 10 cents in the last week. A break of this range today, would likely signal for 20 cent move out of the range in that direction (not all at once, but it would be a technical target to consider).

Todays slightly down, but more importantly very sideways price action in the March 2020 is the result of the market pulling back after its early January breakout to new multi month highs. Soybeans saw price break out to the upside to new January highs beyond the highs of December, only to see a swift reversal and failure to hold onto gain of the last two weeks. While the March 2020 soybeans have had an uptrend since December, price is still in its multi-month range. With that being said, the March Soybean futures are also seeing a rejection from the high end of a technical range the market has been trading in for the last 6-7 months (960-970), which is not a great look for the bulls at this time. The low end of this range around the 870 area was where the December rally in the Soybeans found its origins. Keep in mind, there is a battle over the trend going on right now, and any chop inside this rang should be taken lightly without mor confirmation.

From a technical perspective, the March Soybean futures have continued to consolidate the trend higher it began in December. The 200-day moving average is at 921, while the 50 day remains above it at 928.25; both levels the market may want to pull back to test in a deeper correction and a break below the current month of January low at 935.5. The 50% Fibonacci supportive inflection zone is also located in this area at 922, as well as the gap fill (921) for the open gap up from 12/13. Upside momentum indicators signaled over bought conditions on the push to 960, and now the reversal off those highs is confirming the short-term reversal the market needed to hopefully bring those indicators back to their mean. Do not get me wrong, I believe we will continue to hold the January lows; however in the event the market does see a breakdown to 920-915, there are bigger technical supports that may require testing before the uptrend resumes; and the market is ready to break out of the 960-970 multi month range highs. As I pointed out in my 1/2/2020 report; resistance should be looked out for in the 947-950 area now that the market has traded below, as this is where the lows of 12/30 held to take the market to the 2020 highs. A move about this area would break highs of today and be a good short-term signal that the March 2020 soybeans may want to retest the January highs at 961.

In the near term, the 940-937 Fibonacci inflection zone has found support, which also correlates with the (highlighted light blue) congestion zone the market found resistance into late December (broken resistance, now being tested as support). There is also a volume valley in the market profile (blue arrow) that is at this area, suggesting that it could be a point of inflection (reversal) in the market as volume typically tapers off at this price area.

Dan can be reached at (312)277-0110 with any question or further comments, and you can click here to get access to the Zaner Ag Hedge daily newsletter to receive his emailed commentary daily!

Get all of Dans commentary, as well as the entire Zaner Ag Hedge teams thoughts:

http://www.zaner.com/landing/ag_hedge_newsletter.asp?AP=DHUSSEY

March 2020 Soybean Futures 60min Chart



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About the author


Dan began his career in 2006 as an arbitrage and clearing clerk for Spyglass Options in the Eurodollar futures options pit on the floor of the Chicago Mercantile Exchange. Taking his employing brokers advice, Dan soon left the floor to pursue a career “behind the screens upstairs”, as there was an inherent lack of opportunity for market making in open outcry pits. After graduating from the University of Notre Dame in 2009 (and for the subsequent 10 years), Dan leveraged his IT background in networking and computer programing to begin developing computerized trading algorithms and trading systems for multiple private equity firms and his own account. He eventually found his specialization in trading carry trade dynamics in currency and interest rate futures; while simultaneously building his experience in trading both inter-market and intra-market spreads. His trading experience later expanded to include most commodity spreads, with an emphasis on carry trade economics in agricultural commodities. In 2016 Dan decided to take his career full circle by becoming a series 3 and 34 licensed broker; and expanded his outreach to the agriculture production community. In 2018, he joined Zaner Financial Services Ag Hedge division, bringing his knowledge and expertise of carry trade economics and continues expanding exposure to spread markets. Dan can be reached at (312)277-0110 by phone, @DanielHusseyJr on twitter, @DanSOTD on facebook, and emailed at dhussey@zaner.com.
 
 
Contributing author since 2/15/2019 

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