Technically Speaking

Given the lack of bullish enthusiasm in the soybean market the last month and a half it is understandable if we've forgotten that the last major (long-term) signal was bullish. Going back to August, the more active November contract posted a bullish key reversal, moving to a new low early in the month before skyrocketing and closing well above the July high. The August peak of $14.09 1/2 followed by a September top of $14.08 1/2 proved to be a test of resistance near $13.71, with both months falling back below this price at the close of the month.

As September drifted into October the November contract drew closer to technical price support near $12.56 3/4, a price that marks the 61.8% retracement level of the August range from $11.62 1/2 through the previously mentioned high of $14.09 1/2. With the January now the more active contract, it continues to hold near this price support as November (the month, not the contract) gets under way.

Monthly stochastics (second study) continue to show the market is near oversold, with both the faster moving blue line and slower moving red line holding at about 20%. From a technical point of view, this could entice noncommercial traders to add to their net-long futures position. The latest CFTC report (through October 15) showed noncommercial traders holding a net-long position of 136,145 contracts, down slightly from what was seen late in September (third study, blue histogram). Also, the commercial outlook remains bullish with the January to March futures spread holding at an inverse of about 15 cents (bottom study, green line).

With both sides of the market still bullish (commercial and noncommercial), and the market slowly climbing out of an oversold situation, the more active January contract could start to rally. Yes, harvest pressure keep a lid on initial buying enthusiasm, but in time the market should be able to reach the upside target near $14.75, a price that marks the 50% retracement level of the previous major downtrend from $17.89 (September 2012 high) through the August 2013 low.

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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.