November soybeans, prior to Friday, had closed lower for 13 consecutive trading sessions. Friday's lower opening was short-lived and buyers came into the market. Friday's chart pattern is called a bullish engulfing line or bar and is typically a reliable reversal signal IF it is followed up by a higher close on the following day. That day is Monday, and although the jury is still surely out on Monday's close, November soybeans are currently a dime higher and headed for that buy signal confirmation. How far can this correction carry? It's hard to say, with the managed money funds still short 111,000 contracts of soy as of last Tuesday and with the prospective planting and stocks report out this Friday. November soybeans remain oversold, so expect more strength, at least in the short-term.MAY KANSAS CITY WHEAT FUTURES:
Kansas City wheat futures were under heavy selling pressure for the past few months before a short-covering rally beginning March 10 sent wheat up for nine of the past 12 trading days (including Monday). Monday trade is not complete, but currently KC May is up sharply and has risen above the 50-day moving average. A solid close above this level could result in more short-covering, as funds had recently established a net-short position in KC, and remain short in Chicago. Supporting the wheat markets this week is a decision by Russia to put an absolute floor on their FOB wheat offer at $275 to $280 per metric ton (mt), as their wheat offers have by far been the world's cheapest.MAY SOYBEAN OIL FUTURES:
As in wheat, soybean oil futures have been on the selling end of fund activity of late, where funds exited a once very large net long and actually went short soybean oil. Although that position has received help from other veg oil markets, including domestic China veg oil values, this is a market that has been overdone. As renewable diesel capacity continues to ramp up in this country and in others, if crude oil can finally find some stability with all the recession talk, look for soybean oil to begin to move higher.
Comments above are for educational purposes only and are not meant as specific trade recommendations. The buying and selling of grain or grain futures or options involve substantial risk and are not suitable for everyone.
Todd Hultman can be reached at Todd.Hultman@dtn.com
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