wmeubank@ocp.kcmo.com
COMMODITY REVIEW AND OUTLOOK
195 Route 6A, Suite 6, Orleans, Massachusetts
(October 23, 1997) SOYBEANS: SHORT TERM–Soybean oil has been leading the complex higher. Bullish input also came from news that Brazil would accept genetically altered beans. European demand for bean oil is thought to be growing. Funds were also buyers. The problem with the market now is that while the funds are bulling the market up, supplies are increasing past the point of meeting demand. In the past week, we've heard news that the Chinese, then the Brazilians, canceled purchases. This is not positive, and implies that buyers should remain cautious and nimble. Domestically, rain may impede the harvest and may provide support. However, most of the beans are harvested, and supplies are ample. For the most part, corn has led the beans higher. While I suspect that this market is a buy, I still believe that it is not a buy on strength. We are still seeing sellers on the highs, not buyers.
RESISTANCE–Resistance remains near 695-700, 710-714, 720, 735, 750, 775-780.
SUPPORT–Support basis Nov. beans remains near 680-675, 652-655, 642-644, 636.
RECOMMENDATION–Aggressive traders might take advantage of the recent rally to sell. Sell Nov. beans in the upper 690's, lower 700's with stops over 710 or 715 or of 5-10 cents. Look for a decline to the mid 680's and consider reversing from that area, as buyers are emerging at that price level. Recent action suggests that beans may be becoming a buy on dips, their inability to hold gains not withstanding. The problem, as always, is risk control. If you have deep pockets, breaks into the mid 680's-670's could be an excellent area to consider purchases based on the idea that future dips remain a buy. Conservative bulls should take advantage of breaks to buy Jan. or Mar. calls. Traders might consider buying Nov. beans on a dip into the mid-low 680's. Use stops under 680 or 675 or of 5-10 cents. More conservative traders might hold out for a decline back to the 675 area. Use stops of about 10 cents. I would also contemplate buying Dec. oil on pullbacks to near 2400 with 50-100 point stops, and Dec. meal on pullbacks to the 218 area if aggressive, the 212 area if more conservative. Use 3-5 dollar stops. Objective open. If you are long meal or oil, tighten stops to protect profits.
M. Steven Morgan
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