For the Week of January 27, 2013
The Trade Spotlight advisory service applies the GBE trading methodology (buying or selling commodity contracts based on breakouts of chart formations and technical indicators) to identify one to two trade setups per week.
Highlighting This Week’s Potential Breakouts:
Let’s review the Soybean complex:
Soybeans
The May 2014 Soybean contract is trading sideways and setup for a Neutral Market Strategy. This strategy involves “writing” (selling) call and put options on either side of the resistance and support levels. The potential upside resistance is the 1349’4 high (2/05/13). The contract tested this high on 9/04/13 but failed to follow through. The potential downside support is the twelve-month contract low of 1175’4 (8/07/14). The goal is to collect premium on both sides as the contract continues its sideways trading pattern. On Friday, the contract broke through albeit closed above a lower trend line. There are touches on the lower trend line at 1175’4 (8/07/13), 1177’2 (8/08/13), 1248’6 (1/08/14), 1249’0 (1/09/14), and 1250’0 (1/13/14). This lower trend line is acting as support as well. A 20-day Exponential Moving Average and 50-day Simple Moving Average are flat. MACD, a trend indicator, and Stochastics, a Momentum indicator, are flat as well.
Soybean Meal
The March 2014 Soybean Meal contract has formed a Double Top Formation and Trend Line Formation. Both of these formations potentially setup a trade opportunity to the downside. Though currently the Trend Seeker (a US Chart Company tool to help identify market trend) is Up. In addition, the MACD, a trend indicator, and Stochastics, a Momentum indicator, are bullish. Along with the indicators reversal, a close below the lower trend line will trigger a trade to the downside. There are touches on the trend line at 378.8 (11/05/13), 403.4 (1/02/14), and 409.0 (1/13/14). A potential downside target is the 378.4 low (11/01/13).
Soybean Oil
The March 2014 Soybean Oil contract setup a Hi-Lo Breakout Formation. A close below the twelve-month contract low of 37.42 (1/08/14) will trigger a short entry opportunity. On Friday, the contract made a new low at 37.09, but failed to close below 37.42. The Trend Seeker (a US Chart Company tool to help identify market trend) is Down. In addition, the MACD, a trend indicator, is extremely bearish. Stochastics, a Momentum indicator, is bearish in the “over sold level” RSI, another Momentum indicator is strong to the downside. A potential stop loss can be placed above the pivot point of 38.45 (1/21/14) and 20-day Exponential Moving Average (38.20). A potential target of 33.46 is calculated using a Wave Projection Price.
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