October 22, 2008


CBOT January soy trapped in downtrend


CBOT January soy futures are under selling pressure again Tuesday (October 21) morning, after experiencing a short-covering bounce the past three trading sessions.


Prices remain in a 3 1/2-month-old downtrend on the daily bar chart, from the contract high of US$16.48 a bushel scored in early July.


The next downside price objective for the January soy bears is to produce a close below strong technical support at last week's low of US$8.38 1/2. The soy bulls would begin to regain some near-term technical momentum by producing a close back above major psychological resistance at US$10.00 a bushel, basis January futures.


Near-term technical resistance for January soy is located at Tuesday's high of US$9.55 1/2 and then at last week's high of US$9.72 1/2. Technical support is located at Tuesday's low of US$9.15 and then at US$9.00.


The 38-percent retracement level of the price move from the contract high of US$16.48 to last week's low of US$8.38 1/2 comes in at US$11.48. The 50-percent retracement level of the same price move comes in at US$12.44. It would take a push above the 50-percent retracement level to provide some bullish technical strength to January soy.


From a seasonal study perspective, history does show the autumn of the year usually produces a "harvest low" for the soy futures market, and then prices rally into the end of the year.