CARAVELLO'S COMMENTARY Prepared by Commodity Central, Inc.
Soybeans Trading In New Range
(November 22, 2000) During the next few months we will hear much in the way of European soybean meal demand and outlooks for the next South American soybean crop. Mad Cow disease in European livestock has traders anticipating larger bans on meat and bone meals, which is pushing soybean meal prices higher. Are prices already high enough considering the U.S. Dollar, huge exports that are still yet to come and needed to confirm what is already known and South American relief come this Spring? The continuing climb of the U.S. Dollar and evolving prospects on a record South American crop next spring are going to be crucial factors. This new soybean meal demand is not new news, but technically meal is showing signs that this latest breakout is indeed for real. The next few weeks we must see signs of increasing exports of meal or prices are likely to retest the 40-day moving average. I wouldn't buy at these new high levels but consider buying breaks to the 167 to 172 levels.
January soybeans are also starting to turn up technically. By analyzing a chart there are many noticeable patterns and trends that have formed. The latest uptrend can be found by connecting the October 30, 2000 low to the November 10, 2000 low and then drawing another trend line from the October 20, 2000 high to the November 20, 2000 high. This new channel shows resistance near the 498 level short-term and support near 479. By combining this upward channel with the moving averages there is good support near 479. A pullback is likely to come mid- to late next week and should be bought near 480 or lower.
Seasonally prices have a tendency to rally until November 27 before pulling back. On average soybeans also historically go up the day before and after Thanksgiving. Unfortunately for the bulls, this is followed by another drop that usually takes soybeans lower before bottoming around December 10. Keep this in mind when trading and looking at the charts. By using contrary beliefs, I assume some people went long based on this fact alone, which is crazy in my opinion. Look for these traders to get washed out next week as prices are likely to pullback and test the uptrend near 480. Consider shorting January soybeans late Friday the 24 or on Monday the 27. This is a swing-trade and only looking for 481, while risking 501 on a close.
Just by watching the market trade I feel these people who went long on a Thanksgiving seasonal are likely to have gone long at the wrong price. Look for a correction to establish long positions. Options sellers should look to sell puts near levels of support. Follow weekly exports, crop progress in South America and combine it with all the technicals to give you the clearest place of entry. As a swing-trader I will more than likely be going long near or at 480 with GTC stops in place at 470 and moving them up to my entry point once and if prices bounce of uptrend line support. Good Luck and Have a Happy Thanksgiving.
January Soybeans
Key Areas Of Support--456, 464.50, 471, 475.25 and uptrend lines near 468 and 479.
Key Areas Of Resistance--494.50, 500, 513.50, 517, 525, gap at 535 and 551.
Copyright © 2000 Commodity Central, Inc.
November 22, 2000 Jim Caravello Commodity Central, Inc. 4802 East Ray Road, Phoenix, Arizona 1-888-598-7233
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