Soybeans poised for a drop?
Soybeans have certainly caught our attention as a classic head and shoulders pattern has emerged, suggesting a possible trend reversal. This implies a potential drop equivalent to the height from the head to the neckline, taking us towards the 900 level. Could this be signalling more downside in the soybean market?
The current price action is intriguing as an attempt to break the neckline was rejected and prices now hover just below the neckline. Is this the prime moment to consider a short position on soybeans? We think it's worth exploring, and here's why...
As we’ve last pointed out in the “It’s Corn!” idea in March, prices of the 3 major agriculture crops, Soybean, Wheat and Corn generally move together. Back then, we were highlighting the excessive premium in Corn futures as well as the break of a technical chart pattern. Now, we're witnessing a similar tale with Soybean stepping into the spotlight.
From 2019 until now, these three crops have jockeyed for position in terms of percentage gain. Currently, Soybean is in the lead, when compared to Wheat and Corn, in terms of % gain from pre-COVID times and the onset of the Russia-Ukraine conflict.
Another way to look at it is to compare the ratio between Soybean & Corn as well as Wheat. The Soybean/Corn ratio is now at the higher end of its 7-year range, and while the Soybean/Wheat ratio not as extreme, is still closer to its range top.
Another interesting dynamic we can look into is the Natural Gas – Fertilizers – Soybean dynamic. As natural gas is a key input in fertilisers production, the spectacular fall in natural gas prices has preceded falling fertiliser prices. This in turn, impacts soybean prices as well.
Hence, we see a potential downside for Soybean as it trades at a premium as compared to Corn & Wheat. We can consider a short position on the Soybean Futures at the current level of 1340 with a stop at 1450 and take profits at 1250 followed by a subsequent take profit level at 900. This will allow profits on the anticipated downward move while also considering the head and shoulders pattern's target. CME’s Soybean Futures is quoted in U.S. cents per bushel. Each 0.0025 increment equal to 12.5$.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description.
Reference:
cmegroup.com/markets/agriculture/oilseeds/soybean.contractSpecs.html
The current price action is intriguing as an attempt to break the neckline was rejected and prices now hover just below the neckline. Is this the prime moment to consider a short position on soybeans? We think it's worth exploring, and here's why...
As we’ve last pointed out in the “It’s Corn!” idea in March, prices of the 3 major agriculture crops, Soybean, Wheat and Corn generally move together. Back then, we were highlighting the excessive premium in Corn futures as well as the break of a technical chart pattern. Now, we're witnessing a similar tale with Soybean stepping into the spotlight.
From 2019 until now, these three crops have jockeyed for position in terms of percentage gain. Currently, Soybean is in the lead, when compared to Wheat and Corn, in terms of % gain from pre-COVID times and the onset of the Russia-Ukraine conflict.
Another way to look at it is to compare the ratio between Soybean & Corn as well as Wheat. The Soybean/Corn ratio is now at the higher end of its 7-year range, and while the Soybean/Wheat ratio not as extreme, is still closer to its range top.
Another interesting dynamic we can look into is the Natural Gas – Fertilizers – Soybean dynamic. As natural gas is a key input in fertilisers production, the spectacular fall in natural gas prices has preceded falling fertiliser prices. This in turn, impacts soybean prices as well.
Hence, we see a potential downside for Soybean as it trades at a premium as compared to Corn & Wheat. We can consider a short position on the Soybean Futures at the current level of 1340 with a stop at 1450 and take profits at 1250 followed by a subsequent take profit level at 900. This will allow profits on the anticipated downward move while also considering the head and shoulders pattern's target. CME’s Soybean Futures is quoted in U.S. cents per bushel. Each 0.0025 increment equal to 12.5$.
The charts above were generated using CME’s Real-Time data available on TradingView. Inspirante Trading Solutions is subscribed to both TradingView Premium and CME Real-time Market Data which allows us to identify trading set-ups in real-time and express our market opinions. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs tradingview.com/cme/
Disclaimer:
The contents in this Idea are intended for information purpose only and do not constitute investment recommendation or advice. Nor are they used to promote any specific products or services. They serve as an integral part of a case study to demonstrate fundamental concepts in risk management under given market scenarios. A full version of the disclaimer is available in our profile description.
Reference:
cmegroup.com/markets/agriculture/oilseeds/soybean.contractSpecs.html
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