Prices for both soybean meal and soybean oil have been up on lower volume.
This post makes use of artwork derived from works originally found at Wikimedia Commons and used under license.
October soybean meal futures have broken through resistance at around 323, which recently has been acting as support. They may rise further but are displaying a rising wedge pattern, which historically has often has led to steep declines. Caution is warranted in the near future, especially if the price breaks support.
Incidentally, a feed expert told me last week that soybean meal futures will “likely go up for a couple months and then taper off.” He explained that this was due to seasonal effects. That seems reasonable, although from a purely technical standpoint, soy meal futures look pretty risky right now. And the January USDA Soybean Outlook Report suggests that demand for soybean oil has been low lately. But remember: soy meal is a secondary product. Diminished demand for soybean oil may in fact reduce the supply of soybean meal.
While researching the Aroon indicator earlier today, I noticed that Stocks & Commodities magazine, considered one of the leading authorities on technical analysis, is available for free on their web site. You won’t be able to download the PDF edition without a subscription, but the archives area contains web versions of every volume since 1996.
Happy Groundhog Day!
October soybean meal futures gapped up today and formed a small, white marubozu. You can see several small, white marubozus on this chart, and more often than not, they were followed by down days. There appears to be some upside resistance at 323. If the price breaks resistance that would be a bullish indication, but right now indications are bearish.
For today’s chart of the day, I have chosen October soybean meal futures. Soybean meal is an important industrial byproduct from producing vegetable oil. It is used for producing animal feed and also a growing number of human foodstuffs such as ice cream, performance beverages and meal replacement bars.
Since the lows in December, soybean meal futures have performed well but have also taken on a characteristic look that suggests the price has been rising too rapidly–it looks almost like a rising wedge, considered to be a bearish pattern. The price may rise a bit further but the upside potential looks uncertain and the downside risks significant. Short strategies look as though they might be more successful, but it is hard to be very sure at this point. If I planned on playing these, for now, I would try waiting for the rising wedge to extend and/or for a clear support break to develop–or for a good reason to take on a bullish position.
