Soybean Bulls Fade a Bit on Some Early Bearish Clues

jan2011_soybean.gifMarch soybean futures at the Chicago Board of Trade have backed off from Monday’s contract and two-year high of $14.09 a bushel. Profit-taking has been featured and no serious chart damage has yet been inflicted. However, the soybean bulls have faded a bit and there are some worrisome early technical clues that have developed this week. Price action on Monday and Tuesday produced and confirmed a bearish “key reversal down” on the daily bar chart for March soybean futures. Prices Monday hit a fresh contract high and then promptly backed off to close lower, near the session low and score a bearish “outside day” down on the daily chart. An outside day down occurs when a trading session’s high is higher and low is lower than the previous session’s trading range, with a lower close.

A key reversal down occurs when a market makes a fresh for-the-move high and then backs off to score an outside day down, with follow-through selling pressure the next trading session to confirm it. The Moving Average Convergence Divergence technical indicator overlaid on the daily bar chart for March soybean futures is just now producing a bearish line crossover signal, whereby the MACD line crosses below the “trigger” line of the indicator. Importantly, however, near-term and longer-term price uptrends on the charts are still firmly in place, which at present suggests the present price downturn in March soybeans is just a significant correction in an overall price uptrend. The soybean market bulls would regain some fresh upside near-term technical momentum by pushing and closing prices back above strong overhead technical resistance at this week’s contract high of $14.09. The bean market bears would gain better downside near-term technical momentum by producing a close below psychological support at $13.00 a bushel. Stay tuned! Jim Wyckoff

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