Soybean Oil Futures (CBT.BO) saw a 'trend day' gain pattern on Monday, where the open is in the lower 20% of the high-low range, and the close is in the upper 20% - but the market lost -1.4% on the day to close at 44.46¢/lb. This is a very rare event, and has very interesting results when preceded by a rally. Soybean Oil has responded twice to this event with a strong rally of over 5% and one over 30%; however, the other 9 occurrences the market has dropped at least -5% risking 3.27% at the most. So if soybean oil crosses above 46.68 (5% rally) consider the bearish edge void.
Q: How has BO responded to a 'trend day' gain on a decline when it is preceded the day before by a rally?
A: According to the 11 previous occurrences of this event omitting any repeat occurrences within 10 trading days, EventEdge indicates that CBT.BO has shown a somewhat bearish edge that peaks 49 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the most recent occurrence of the event (Monday, 12 Nov. 2007) is Thursday, 24 Jan. 2008.
CBT.BO declines in 73% of the cases (8 of 11) by an average of -10.1% relative to the close on the event date. The average of the three rallies is 2.6%. The overall return of the 11 cases is -6.6%, which, based on the close of CBT.BO on the event date (44.46), provides a target price of 41.53.
To see this in EventEdge click here.
Mickey Schoenhals is an analyst with www.Markethistory.com.
