Bean Oil Base/Reversal Threat Developing

August 7, 2018 2:24PM CDT

While the market has yet to recover above a prior corrective high or an initial counter-trend high needed to expose at least the intermediate-term trend as up, the impulsiveness of Jul's 27.95 - 29.39 rally and the market's survival thus far of last week's relapse attempt to break 13-Jul's 27.95 low are important elements to a number of longer-term base/reversal factors that create a very compelling situation currently. The hourly chart below of Globex day-session prices does not yet reflect today's gains above the 29.00-area, but given the recovery from a 28.39 retest of the 13-Jul low we believe that that 28.39 level serves as a tight but objective risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed by shorter-term traders with tighter risk profiles.
Soybean Oil Dec '18 60min Chart

On the next larger scale, the daily chart above clearly shows 31-Jul's 29.39 high as a key level the market's minimally got to recoup to threaten the longer-term slide and expose at least the intermediate-term trend as up. In this regard we are considering 29.39 as our new key longer-term risk parameter, the break above which would warrant the covering of still-advised bearish exposure by longer-term players. In effect, we believe the market has identified 29.39 and 28.39 as the key directional triggers heading forward.
Soybean Oil Dec '18 Daily Chart
Soybean Oil Weekly Chart

It's from a long-term perspective where a base/reversal prospect becomes very compelling given:

  • the market's proximity to the extreme lower recesses of the past three years' range amidst
  • waning downside momentum and
  • historically bearish levels of market sentiment.

Indeed, the current 27% reading in our RJO Bullish Sentiment Index of the hot Managed Money positions reportable to the CFTC reflecting 54K long positions to 146K shorts is the lowest since July 2010. Now granted, the market has yet to confirm a bullish divergence in momentum needed to stem the clear and present downtrend required to render market sentiment/contrary opinion an applicable technical tool. But a poke above 31-Jul's 29.39 high would suffice in this regard and could leave this market quite VULNERABLE to higher levels.

These issues considered, shorter-term traders are advised to move to a cautious bullish policy from 29.00 OB with a failure below 28.39 required to threaten this call enough to warrant its cover. Longer-term players are advised to pare bearish exposure to more conservative levels, jettison the remaining exposure altogether on a recovery above 29.39 and then also move to a cautious bullish policy. The market's upside potential above 29.39 is advised to be approached as indeterminable and potentially extensive.

Soybean Oil Monthly Chart

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