Soybean Oil: Picking A Bottom
Matthew Bradbard | Sep 26, 2013 02:42PM ET
In the last month, soybean oil futures have depreciated 6.9%. On Thursday, futures probed their lowest levels in three years. Much like we found support around the sesame level in early August I do not anticipate a trade under 42 to last long. Past performance is not indicative of future results. Looking at the chart of December futures below I think we probe bullish plays near the lower red horizontal line in anticipation of a trade near the upper red horizontal line in the coming weeks/months. The first sign that an interim bottom has established would be a settlement above the nine-day MA identified by the green line, which has been challenged two out of the last three sessions.
Monday's Data Watch
Better-than-expected yields in soybeans and favorable short-term weather have contributed to recent pressure in beans and products. Strengths in other Ag products and news of pent up export demand may get this market turned around though. I do think upside will be limited at least through Monday’s USDA stock report. The USDA generally misses and I think there is more likelihood of bullish surprise than bearish. High open interest with the fund money suggests that even with the recent pain felt by bulls they are holding their line.
One could probe December futures with tight stops but my favored play is to get long the next contract (January) and to sell out of the money calls 1:1. Additionally, I don’t trade exclusively on seasonal tendencies but it certainly helps my case when it supports my trade idea.
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