Soybean Meal futures (CBT.SM) started the week off on the wrong foot, closing Monday down $17.90 on the day, at $432.6 per ton. The 'very big' 4.0% decline in July meal on Monday was milder than the rest of the soybean meal curve which closed lock-limit down, losing $20 a ton
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Part of the decline came on the back of news of increased plantings and part was the result of commodity-market-wide reduction in risk and position exposure, a move that resulted in large downdrafts in crude, cocoa, and coffee among others. Is this large decline in meal, after recently being at an all time high, a buying opportunity or is there more downside to come?
Q: What happens when CBT.SM closes down 'very big' a day after closing higher than its previous all time high?
A: Alas there is only but six completed instances but all six have done one thing: go up. Over the next 10 trading days soybean meal rallies 7.07% on average with the spread between the maximum and minimum return a high 21%, nonetheless the consistency of the direction and the opportunity for a sizable return over a relatively short trading horizon make meal a ticket one should take.
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Jason Thompson is a Chicago-based speculator focusing on electronically traded derivatives and their underlying instruments.
