This week’s trade seeks to leverage a budding breakout in the soybean field.
Soy is in the midst of a bullish move that we believe could carry significantly.
- 2020 planting estimates came in below expectations (to be exact, analysts overestimated totals by some 900,000 acres),
- Current hot, dry weather – and forecasts for more – are weighing on production prospects,
- New Chinese commitments to purchase U.S. soy (some 264,000 tons by August 31st), and
- Confidence among market players that deals reached thus far with China (and others) will put a floor under the bean going forward.
Then there’s the technical picture, which is also strong.
To wit –
This is chartage for the last half year of the Teucrium Soybean Fund ETF (NYSE:SOYB), and it clearly shows a commodity in early breakout motion.
- First, the early March RSI oversold read (in red, at bottom), is generally a reliable indicator of a bottom, and
- The subsequent positive divergence from price on both RSI and MACD charts (in green) foretells a change in trend,
- A break above a five month down-sloping trendline (in red, top) marked the start of the lift (in mid-May), then
- A textbook, four month head and shoulders bottom (in blue) that late last week broke above its neckline (black line),
- Not to mention the tremendous volume accompanying the right shoulder of the H&S formation (black box).
It all spells breakout from our point of view.
And that, despite the fact that the commodities have been gut-punched by ongoing trade wars and the current, global corona-inspired economic slump.
We Sow the Soy…
With all the foregoing in mind, we’re going to make a fairly straightforward call on today’s soy crop by
Many happy returns,