FREE Guide - 5 Chart Patterns You Need to Know!

Soybeans Continue to Get Hit Near Critical Level

The bid price in soybean futures (ZS) continues to take a beating.  After staging a rally in the early part of 2014, late June saw a big drop followed by continued selling in July.

Trading on August 1 is again pushing the contract toward short-term support. Following the sharp drop the price has been consolidating between 1118.75 and the July low at 1057.

A lower low -- at 1110 relative to 1118.75 in the consolidation -- indicates sellers are still more aggressive than the buyers.

If the price continues to move below 1057 the expectation is for a continuation to the downside.

Figure 1. Soybean Futures (ZS - November contract)


The initial target, based on subtracting the height of the consolidation from the breakout price, is 996. This is a relatively conservative target given the strong selling seen recently, and is also a 61.8% Fibonacci extension level. The 100% Fibonacci extension level is more aggressive and calls for a decline to 932. This would require a move of similar magnitude to what was seen in late June and early July.

While the trend is down, false breakouts are always a possibility, especially when everyone is expecting a move lower. A break below 1057 followed by a sharp rally back above it is probably a false breakout, and warns of a short-term pop higher.

There is no reason to get bullish about the commodity until it climbs back above 1118.75 though. That would create a higher high, providing evidence an uptrend is potentially underway.

Special Offer: Check out our FREE 5 Chart Patterns You Need To Know about to improve your trading skills report.

Get This FREE Technical Analysis Guide!
Timing is everything, and with this guide, you'll learn how technical analysis can help find the right time to enter and exit your futures trades. Nearly 30 explanations and examples of the most popular technical analysis tools are all in this one handy guide. It's like having a futures trading mentor at your side!