Weekly Analysis: Soybeans

2021-07-26T08:27:33-05:00July 26th, 2021|Oilseeds|

Market Type: 3 (Less Bearish)

  • Trends
    • Secondary (intermediate-term): Down (3-wave pattern)
      • The contract broke below trendline support at $13.65 early in Sunday’s overnight session
        • This completes the bear flag pattern
        • And projects a pattern downside target of $11.61
          • Not this would be in line with the 50% retracement level near $11.5325
      • The previous 4-week low is $12.4750
      • The secondary Wave A low is $12.4050
        • With Wave C expected to take out Wave A to complete the 3-wave pattern
          • The 38.2% retracement level is $12.3025
      • Noncommercial traders increased their net-long futures position the week ending Tuesday, July 20
        • The position was reported at 137,679 contracts, an increase of 7,037 contracts
          • Long futures were increased by 5,017 contracts
          • Short futures were decreased by 2,022 contracts
    • Major (long-term): Down
      • Bearish spike reversal on monthly charts at end of May
      • Downside target area (NSPI) is between $13.0625 and $11.9183
        • The NSPI was calculated at $13.8692 last Friday
  • Fundamentals
    • Bullish
      • Nov21-to-July22 forward curve showing an inverse of 11 cents
        • However the trend is down (weakening inverse)
        • With last Friday’s close off 14.5 cents for the week
  • Seasonality
    • Bearish
      • Nov Soybeans 5-year tends to top second week of June
        • Drops 7% through the second weekly close of August
      • Nov Soybeans 10-year tends to top the second week of June
        • Drops 5% through the last week of September
      • Nov 21 target low weekly close of $12.25 the second week of August
        • Closed last Friday at $13.5175
  • Price Distribution
    • Bearish
      • Nov21 at $13.5175 puts it in the upper 10% based on weekly closes only back through 2011
      • Nov22 at $12.4950 puts in in the upper 24%
  • Implied Volatility
    • High
      • Nov Soybeans  ~ 26%
        • High volatility tends to reflect increased noncommercial activity
        • High volatility generally means option premiums are overvalued
  • Theoretical Positions
    • 2020-2021
      • All remaining cash could’ve been sold at the end of May with the cmdty National Soybean Price Index (NSPI, weighted national average cash price) calculated near $15.16.
        • Based on major bearish spike reversal by the NSPI on its monthly chart
        • The NSPI posted a new 4-month low of $12.9239 during June.
    • 2021-2022
      • It’s possible 25% of expected production was priced on a trailing stop last week as November soybeans took out its previous 4-week low of $13.2575.
        • Another 25%, or catchup sales, could be priced on confirmation of Wave C with a break below trendline support at $13.56 this week.
    • 2022-2023
      • It’s possible 25% of expected production was priced on a trailing stop last week as Nov22 soybeans took out its previous 4-week low of $12.06
        • Another 25%, or catchup sales, could be priced this week.
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