November 19, 2008


Soy sees collapse in volatility



Chicago Board of Trade January soy futures have seen quieter trading activity the past four sessions to produce a "collapse in volatility" on the daily bar chart.


A collapse in volatility is defined by three or more successive price bars on a bar chart that are significantly smaller - smaller daily trading range - than recent price bars. When a collapse in volatility occurs, odds are then high that at some point soon a significantly bigger price move will occur. The direction in which the bigger price move occurs following a collapse in volatility isn't discernible by the phenomenon itself.


January soy has been trading in a sideways and choppy trading range for the past six weeks. That trading range on the daily chart is defined by strong technical support at the October low of US$8.38 1/2 a bushel and by major psychological resistance at US$10.00 a bushel. The direction in which soy prices break out of this trading range is also likely to be the direction of the next significant near-term price trend in the market.


Near-term technical resistance for January soy is located at Monday (November 17) high of US$9.17 3/4 and then at US$9.25. Near-term technical support is located at US$9.00 and then at Monday's low of US$8.85.    

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