January beans hosted a sizable rally throughout the months of October and November as fund buying and concerns over South American growing conditions kept prices inflated. The end of November brought about a rejection from the Fibonacci Confluence zone from 1051’0 – 1056’2 and the market has been unable to press this area ever since. December 19th and 20th hosted a downside breakout from yet another significant area of structure, which begs the question “Is there more downside from here in the soybeans?”
It’s not uncommon to see agricultural markets rally throughout the growing season as weather concerns have the potential to build a “risk premium” into the futures prices. As has been the case this season, this risk premium often times will dissipate from the market as farmers progress through planting season, which could help to explain the drastic decline in soybean prices following the mid-June peak. Recent headlines have centered around potential adverse weather conditions in key growing areas of South America. Any disruption due to adverse weather has the potential to adversely affect production figures out of these key growing areas, ultimately damaging world production figures.
In light of recent price action, it appears as though these concerns are beginning to subside and the price action is beginning to roll over to the downside. Soybeans have breached a handful of significant support levels over the past week and all eyes are now on whether or not the Jan’17 Soybeans can maintain the psychological $10.00 figure to close out the year. Despite the recent weakness in the soybean market, price action still has yet to make a relatively lower low below the November 14th low of 975’2. A sustained close below this level could signal a potential intermediate term trend reversal from the current positive skew following the September lows.
All things considered, the market appears more range-bound than anything at this point in time and the near-term price action suggests that there may be further downside in store for market participants as traders gear up for the New Year.
Series 3 Licensed, CMT
Market Strategist II
Erik attended the University of Illinois in Champaign where he majored in Communication with a concentration in Economics. As a member of the Market Technicians Association, he has distinguished himself as a professional in the field of technical analysis and currently holds the Chartered Market Technician (CMT) designation.
Erik began working as a Technical Analyst at JS Services Research and Trading LLC, where he analyzed futures contracts providing traders with key technical levels and trading strategies. While there, he also created a 4-week Technical Analysis educational course geared toward teaching traders how to utilize Technical Analysis in their trading strategies.