Soybean Technicals Bearish Short-Term; Longer-Term Buy
Soybeans have climbed to a record high this month, climbing above $13 a bushel on January 14, 2008. Since then, the market has seen some consolidation, and I am recommending a short-term options play as the technical picture remains a bit bearish.
The stock market’s late January meltdown and general economic malaise has spread across many markets, even pulling down commodities with more bullish fundamentals. The latest weekly Commitments of Traders report from the Commodity Futures Trading Commission showed trend-following funds had been liquidating positions in soybeans. While soybeans bounced back on Monday, January 28, I’m recommending a bearish options position at this time. I see the technical picture as remaining weak for the time being. I recommend buying the May soybean 1180 put, for 33 cents, or about $1,650, not including commission costs. This option expires on April 25. If the market rallies up to $13.25, I’d get out of this position. My target is $11 on the trade. You can see on the 60-minute chart below that soybeans look to roll over to the downside.
Again, this is mainly a technical play. This market may yet see new record highs as we enter growing season. According to a report out of Buenos Aires, Argentine soybean yields are forecast to fall at least 6 percent in the current crop year because of dry, hot weather. And if the U.S. dollar continues to weaken, we could see another bullish year for many commodity markets—similar to 2007. Last year, soybean futures prices rose more than 75 percent. A declining dollar is seen boosting overseas demand for both corn and soybeans, and the U.S. is a top global producer and exporter of both crops. U.S. export sales of corn in the week ended Jan. 17 were 25 percent higher than the average of the previous four weeks, the Department of Agriculture said Jan. 25. Soybean sales were 39 percent higher than the average. Below is a daily chart, which looks slightly more bullish. For a long-term play, I would recommend going long the front-month futures on a move to $11.90.
Phillip Streible is a Senior Market Strategist with Lind Plus. He can be reached at 800-803-8037 or via email at pstreible@lind-waldock.com.
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