Technically Speaking

At first glance it would be hard to characterize the soybean market as bullish. The weekly chart for the more active July contract (top chart) shows the July has been threatening a bearish breakdown as it continues to test support near $13.20, a price that marks the 61.8% retracement level of the previous uptrend from $11.43 1/4 through the high of $16.05 3/4. So often that one could argue that a triple-bottom has been established, bringing to mind the old market saying of "Triples always get taken out."

Despite market lore, the July soybean contract is still showing technical indicators pointing towards a bullish turn. Again, support has held meaning the contract could look to push back into resistance between $14.11 and $14.90 1/2, the 33% and 67% retracement range of the sell-off from the above mentioned high through the low of $13.31 3/4 (week of November 12, 2012).

It is hard to tell without a microscope, but weekly stochastics (middle study) are bullish. The last major crossover was bullish, in conjunction with the mid-November low, offsetting the bearish crossover established with the high from last September. The fact the bullish crossover occurred below 20% indicates the trend has actually turned up meaning at some point the contract should be able to at least test the recent high of $14.83 1/2. Note that this peak from the week of February 19, 2013 was an initial test of the resistance at the 67% retracement level.

The contract should be able to build on its bullish fundamental situation, reflected in the strong inverse of the July (old-crop) to November (new-crop) futures spread (bottom study). The close this past week of $1.69 1/2 (inverse) puts it in position to test the recent high of $1.78 3/4, and possibly its high of $2.02 (dashed green line). The stronger the inverse, in this spread the more bullish the commercial outlook for the old-crop market in relation to new-crop. Along with that, the inverse in the July to August (old-crop only) futures spread closed at its high of 54 cents (not shown). A contract (or market) with this bullish of a commercial outlook should see at least a 50% to 67% retracement of its previous downtrend, if not a full 100% move.

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Commodity trading is very complicated and the risk of loss is substantial. The author does not engage in any commodity trading activity for his own account or for others. The information provided is general, and is NOT a substitute for your own independent business judgment or the advice of a registered Commodity Trading Adviser.