Technically Speaking

While the major (long-term) and secondary (intermediate-term) trends in soybeans remain up on the monthly and weekly charts respectively, the daily chart for the January contract is showing the minor (short-term) trend has turned down. This isn't an overly surprising development, given recent market signals.

First, the contract was testing technical resistance between $13.26 1/2 and $13.45 1/4, prices that mark the 50% and 61.8% retracement levels of the previous downtrend from $14.06 (high from August 27, 2013) through the low of $12.47 (November 5, 2013). At the same time, daily stochastics (bottom study) crept back above the overbought level of 80%. Combined, this left the contract vulnerable to a round of noncommercial long-liquidation, particularly with the latest CFTC Commitments of Traders report (positions as of Tuesday, November 26) showing noncommercial traders holding a net-long of 154,794 contracts, an increase of 11,632 contracts from the previous week.

The crossover in stochastics (faster moving blue line crossing below the slower moving red line) looks to be occurring below the 80% level, meaning the sell-off could last only a few days. Support is pegged between $13.08 1/4 and $12.84 3/4, prices that mark the 38.2% and 61.8% retracement levels respectively of the previous uptrend from the November 5 low ($12.47) through Monday's (December 2) high of $13.46. Also notice that Monday's activity established a bearish reversal on the daily chart, another signal that the contract should work lower.

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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.