February 26, 2009

Chicago Board of Trade May soy futures late last week dropped to a fresh two-month low of US$8.54 1/4 a bushel. Price action this week has seen some tepid short covering in a bear market, but the bears continue to hold the near-term technical advantage.

May beans continue to trade below a six-week-old downtrend line drawn from the January and February highs. It would take a move in prices back above major psychological resistance at US$10.00 a bushel to push above, and negate, the downtrend line on the daily chart.

Two popular moving averages (nine-day and 18-day) overlaid on the daily chart for May soy are also in a bearish posture at present, as the nine-day is below the 18-day moving average. Both moving-average lines are also trending solidly lower, which is another bearish technical clue.

The next downside price objective for the soybean bears is to push and close May futures prices below strong technical support at the contract low of US$7.86 1/2, scored in early December. Above that key level lies key chart support at last week's low of US$8.54 1/4. Psychological support is also located at US$8.00 a bushel.

For the soy bulls to begin to gain some fresh upside near-term technical momentum, they will have to push and close May futures prices above solid technical resistance at US$9.40 a bushel. Below that level is located psychological resistance at US$9.00 and then technical resistance at US$9.15 and US$9.25.