January Soybeans Test Resistance
The January soybean contract closed Monday’s session rallying for the fifth day in a row - closing at the exact 61.8% retracement of the August 28th high and October 12th low. Can the contract continue to build on its recent strength? Or will this week’s World Agricultural Supply and Demand Expectations (WASDE) report cut the rally short.
The Bullish Case:
Uncertainty surrounding the Brazilian soybean crop has been a major catalyst for the recent strength observed in the January soybean contract. The hot, dry weather affecting the major soybean growing areas has certainly taken a toll on yields, but it may be too early to tell if the damage done has been materially significant. Thursday’s USDA report could provide a glimpse into the situation - specifically, if we see a downward adjustment to estimated South American production estimates, the rally in soybean prices can certainly continue.
The Bearish Case:
After the open, January soybeans topped out at 1369 ¾ - a single tick away from the upper boundary of our 3-star resistance pocket between 1360 and 1370. Failure to close above 1370 serves as a warning signal in the short-term that the rally may be waning. Moreover, after making a 1-year high in January Soybean Meal contract, prices quickly turned lower. If we see soybean meal prices correct sharply, it will likely be a boon to January soybean prices. Lastly, the USDA is slow to make adjustments - even though the weather has not been favorable in Brazil, USDA may leave South American production estimates (particularly Brazilian production estimates) unchanged. Leaving production estimates unchanged would come as a disappointment to the trade, and also push prices lower.
What To Watch For:
Thursday’s WASDE report is likely the largest catalyst for price action this week. In that report, demand estimates and South American production estimates are likely going to be the two largest factors. But, there are a few other things that should be monitored closely. Specifically, domestic export performance through the end of the year, and price action across the other components of the soy complex - meal and oil - will have an effect on prices in the coming weeks and months.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.
The Bullish Case:
Uncertainty surrounding the Brazilian soybean crop has been a major catalyst for the recent strength observed in the January soybean contract. The hot, dry weather affecting the major soybean growing areas has certainly taken a toll on yields, but it may be too early to tell if the damage done has been materially significant. Thursday’s USDA report could provide a glimpse into the situation - specifically, if we see a downward adjustment to estimated South American production estimates, the rally in soybean prices can certainly continue.
The Bearish Case:
After the open, January soybeans topped out at 1369 ¾ - a single tick away from the upper boundary of our 3-star resistance pocket between 1360 and 1370. Failure to close above 1370 serves as a warning signal in the short-term that the rally may be waning. Moreover, after making a 1-year high in January Soybean Meal contract, prices quickly turned lower. If we see soybean meal prices correct sharply, it will likely be a boon to January soybean prices. Lastly, the USDA is slow to make adjustments - even though the weather has not been favorable in Brazil, USDA may leave South American production estimates (particularly Brazilian production estimates) unchanged. Leaving production estimates unchanged would come as a disappointment to the trade, and also push prices lower.
What To Watch For:
Thursday’s WASDE report is likely the largest catalyst for price action this week. In that report, demand estimates and South American production estimates are likely going to be the two largest factors. But, there are a few other things that should be monitored closely. Specifically, domestic export performance through the end of the year, and price action across the other components of the soy complex - meal and oil - will have an effect on prices in the coming weeks and months.
Check out CME Group real-time data plans available on TradingView here: www.tradingview.com/cme/
Disclaimers:
CME Real-time Market Data help identify trading set-ups and express my market views. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com/cme/
*Trade ideas cited above are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management under the market scenarios being discussed. They shall not be construed as investment recommendations or advice. Nor are they used to promote any specific products, or services.
Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures, LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results.