August 7, 2008


CBOT soy suffer serious chart damage



The downtrend in soy continued Tuesday (August 5) when November soy futures hit a fresh three-month low of $12.51 a bushel.


Chicago Board of Trade prices are in a steep five-week-old downtrend from the early-July contract high of $16.36 3/4. Serious near-term technical damage has been inflicted and the bears still have solid downside technical momentum.


The next downside price objective for the bears is to push and close November soy below psychological support at $12.00 a bushel. Above that level, solid technical support for November soy is located at Tuesday's low of $12.51,


For the bulls to begin to regain some upside technical momentum they will have to push and close prices back above psychological resistance at $13.00. Above that lies strong technical resistance at $13.50 in November futures.


Price action the past two weeks has also seen serious chart damage inflicted from a Fibonacci technical perspective. Prices have dropped below three major retracement levels (61.8 percent, 50 percent and 38.2 percent) of the price move from the April low of $10.45 1/4 to the contract high of $16.36 3/4. The soy bulls would have to push prices back above the 50% retracement level, located at $13.41, to regain some Fibonacci-related technical strength.


The soy bulls can correctly argue that November futures are now into technically oversold territory, as measured by the 14-period Relative Strength Index. The RSI for November soy is presently reading 26.21. Any RSI reading below 30.00 does suggest a market that is overdone on the downside and due for at least a corrective bounce very soon.


The last time the RSI dipped so low on the daily chart for November soy was a reading of 25.45 on March 20. On April 1, the market did put in a low and work higher into the early July timeframe.


Seasonality studies show soy futures prices trending sharply lower from the August timeframe into the October timeframe.

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