Soybean Oil Futures (CBT.BO) have rallied on four of the past five trading days, but are still down 0.5% over the span. BO rallied 0.7% during Wednesday's session to close the day at 58.26¢ per lb. The gain came on an 'outside day' pattern, where the high was higher than the previous day's high and the low was lower than the previous day's low. This pattern can be seen as a sign of increasing volatility. BO is already trading at 50-day lows; will matters get worse?
More specifically, let's take a look at the September Contract.
Q: How has September bean oil BOU performed in the past, omitting repeat occurrences within 10 trading days, when, during the third quarter, it rallies by more than 0.5% on an 'outside day' pattern while trading at a 50-day low?
A: According to the 14 previous occurrences of this event, EventEdge indicates that BOU has shown a strong bearish edge that peaks 14 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Wednesday, July 30, 2008) is Tuesday, August 19, 2008.
BOU declines in 93% of the cases (13 of 14) by an average of 6.3% relative to the close on the event date. The average of the one rally is 1.8%. The overall return of the 14 cases is -5.7%, which, based on the close of BOU on the event date (58.53¢), provides a target price of 55.19¢.
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Ronish Patel is an analyst with MarketHistory.com.
