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Soybean Market Set Up for Potentially Volatile Action Next Week, Says Analyst

Soybeans ended the week on a bullish note as they traded at price levels not seen since August 10. For the week, the November contract gained 15½. It was estimated that the funds were long 6,000 bean contracts coming into today. With the market taking out the double-top resistance at 9.78 and 200-day MA at 978½, they no doubt fueled today’s move higher as they added to their length. Adding to the bullish enthusiasm was another export sales announcement of 190,000 tonnes of beans sold to Mexico this morning. This was the fourth day in the last five that we saw a flash sales announcement showing that we are trading at levels importers view as value.

The heat that the Midwest is currently experiencing is drying down the crop fast and should allow for the trade to get a better handle of the size of the crop sooner than originally thought. This might have forced some market bears to the sidelines. The trade has constantly disagreed with the government thoughts on the size of the crop. If we come in next week and actual yield results are worse than thought, it could ignite another round of buying. This sets the market up for some potentially volatile action next week.

Today’s trade action took out the double top, which now projects the market to test the $10.15 price level. The long-term downtrend line off the summer highs provided resistance at the 9.87¼ level today. If we gap above this point Sunday night, we could be off to the races. On the other hand, if the yields are better than anticipated and the market falls back below the double top at 9.78, today’s move higher will look like a bull trap. Needless to say, next week’s trade could set the tone for the next few weeks. 

 

Rich Nelson
Allendale Inc. 
815-578-6161

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