(March 11, 2002) SOYBEANS: Soybeans broke out of a five-month consolidation this week and traded to the highest levels seen since early October. While some traders may see a head and shoulders bottom formation and others a 1-2-3-bottom, it is clear that this is indeed a new bull market. While soybeans retreated aggressively from current resistance levels in early January I believe this time the results will be different. Unlike early January, this is the most bullish time of year seasonally for soybean prices and the commercials hold a bullish position. Now that we've traded above near by resistance, the next major level of resistance is the 61.8% retracement of last summers bear market, which lies at $4.90 basis the May contract. I should mention that the study of Fibonacci techniques is also used to project price objectives using expansion analysis. By taking an A-B-C pattern at the base of the move, Fibonacci expansion analysis points to the $4.93 level as the next projected price target. The "agreement" of a Fibonacci level and an expansion level indicates that while prices are likely to reach this area, it will be strong resistance.
SOYBEAN OIL: I recommended a long soybean oil position this week and am looking for prices to break above 1700 resistance in the near term. This is the second test of the 38.2% retracement level on the weekly charts, but (similar to soybeans) the seasonal and technical trends are now both bullish. The commercials are holding a very bullish position in bean oil, which also indicates that prices are likely to surge ahead and test the 61.8% level of resistance at roughly 1750. Traders not on board should look to enter long on any retracement to the 1600 price area basis the May contract.
