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TECHNICAL ANALYSIS


Bean Sprouts

10/13/09 08:42:05 AM
by Austin Passamonte

Here's the short-term to near-term outlook for soybean futures market.

Security:   Soybean Futures (ZS)
Position:   N/A

Soybean futures (ZS) have spent the better part of 2009 recovering from the epic slide off peak highs in 2008. The trip from more than $13 a bushel to less than $5 a bushel was quite the decline. At $5,000 per $1 bushel price value change, we're talking $40,000 per ZS contract short from peak to trough. Putting that into context of S&P futures (ES contract) price movement, it would be 800 index points' decline — a pretty big move in a few months' time. Figure 1.

FIGURE 1: BEANS, WEEKLY
Graphic provided by: TradeStation.
 
Since the late 2008 lows, price bounced off a 1-2-3 bottom and recovered 50% of the range to date. Bean futures have rolled there since June, consolidating in a wide-range fashion for the next push up or down. So far, the 62% retracement level near the $10 zone has been resistance in this cycle. See Figure 2.

FIGURE 2: BEANS, DAILY
Graphic provided by: TradeStation.
 
Dialing into the daily-chart view, $9.20 has been a trendline magnet for price since early August. A clean release will happen eventually, and it looks to be upside from here. See where price broke down through the wedge (purple lines) in a bearish fashion? That pullback up into resistance (blue line) attracted sellers right there with buy-stops clustered at or above 921. Now that the wedge faked out the downside break, subsequent upside breakout has those trapped shorts covering while new buyers step in. This classic "oops trade" failed a downside pattern = strong upside signal.

FIGURE 3: BEANS, DAILY
Graphic provided by: TradeStation.
 
Blue arrows in Figure 3 marks a wedge low near 850 and a wedge high near 1025 — 175 cents' width range. Projecting the 920 break + 175 higher = 1100 zone is a measured objective. From there it's onto the 1180s and 1300s if or as momentum continues higher.

Planting through a harvest season cycle is just about complete. Consumption and usage dictates what comes next. The technical picture remains bullish for beans, perhaps once again in the teens to come.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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Date: 10/14/09Rank: 4Comment: 
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