From a high of 411.4 (December contract) in May, soybean meal futures have traded all the way down to a low of 340 this month, currently trading just above that low.
The near vertical drop at the start of July has been followed by a consolidation, albeit an active one, between 366.6 and 340.
Figure 1. Soybean Meal Futures (ZM, December Contract) Daily Chart
The breakout of this consolidation could lead to another big move. Momentum is decidedly down, and a lower May high relative to the 2012 high even puts the long-term picture favoring a break lower. Ultimately though, a break above or below the consolidation can be traded.
The break lower is easier to define as 340 has been tested on multiple attempts. If 340 breaks the target is 300, with a more conservative target or profit taking area at 325. 2011 lows are near 275 which may also act as a magnet.
A break above the consolidation must be considered a pullback in an overall downtrend at this point. Expect selling pressure to commence again in the 376 to 385 region. Since the break-out higher fights the overall downtrend trend it should traded with more caution, and kept on a tight leash given the recent propensity for larger to moves to downside.