Soybeans And Corn May Move Higher
Jay Kaeppel | Jan 29, 2019 01:44AM ET
In this piece, I wrote about a strong seasonal tendency in corn based on the planting cycle. Turns out soybeans are in the same boat. This can be a good thing for traders who are, a) willing to speculate, b) smart enough not to the bet the ranch.h3 The Trend/h3
Figure 1 displays the annual seasonal trend for soybeans. Just as with corn, the months of February through April tend to see positive results. Please note the use of the word “tend” and the lack of the words “sure” or “thing”.
Figure 1- Soybean Annual Seasonal Trend (Courtesy Sentimentrader.com)
h3 The History/h3Figure 2 displays a monthly chart for soybeans going back 4 decades.
Figure 2 – Monthly chart for Soybeans (Courtesy ProfitSource by HUBB)
Here are the two things to note (using some pretty technical terms):
*Soybeans (like most commodities) spend a lot of time “churning”, “grinding”, “consolidating” and generally going “nowhere”
*HOWEVER, “when beans go they really go!”
*The primary thing to remember is that when soybeans get going to the upside, typically the best thing to do is to banish the word from “overbought” from your trading lexicon. See Figure 3.
Figure 3 – Big moves in Beans (Courtesy ProfitSource by HUBB)
Now let’s focus on the months of February, March and April. Figure 4 displays the hypothetical $ growth (no slippage or commissions) from holding long a 1-lot of soybean futures during February, March and April every year starting in 1976.
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Figure 4 – Long 1 soybean futures contract during Feb-Mar-Apr every year since 1976
h3 The Results/h3Some things to note regarding Feb-Apr in soybeans:
*# of times UP = 33
*# of times DOWN = 10
*Average $ gain = +$3,808
*Average $ loss = (-$1,788)
*Largest gain = +$15,025
*Largest loss = (-$3,775)
In sum, a winners to losers ratio of 3.3 (or 76% winners), an average win to average loss ratio of 2.13-to-1
Bottom line: these are great numbers for traders BUT they entail the assumption of significant risk (2017 saw a loss of over -$3,400)
h3 An Alternative Way To Play/h3Teucrium Soybean (NYSE:SOYB) is the Teucrium ETF designed to track the price of soybeans. SOYB allows traders to buy soybeans just as they would buy shares of stock. Just remember that you don’t get the same leverage buying SOYB as you would buying a futures contract.
Figure 5 displays a monthly chart for SOYB and Figure 6 displays a daily chart. Note the significant resistance level at around $16.96 a share. If SOYB takes out that level sooner than later it might be a bullish sign.
Figure 5 – SOYB Monthly (Courtesy AIQ TradingExpert)
Figure 6 – SOYB Daily (Courtesy AIQ TradingExpert)
h3 Summary/h3Soybeans have been beaten down a bit over the last several years. If (and “yes”, that is a big “If”) beans are going to make a move higher, history suggests that the Feb through April period is a likely time for that to happen.
Am I “recommending” or even “merely suggesting” that you should buy soybean futures or ticker SOYB? Not at all. I adhere to that old media adage of “We (I) report, you decide.”
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