My latest options play is in the soybeans because I’m considering whether the bull run in soybeans is over. Ever since the latest USDA report on March 10 the soybean market has changed dramatically. For this commentary I am going to focus on both the fundamentals and my favorite technical indicators on the daily chart.
The right indicators
I have added some of my favorite technical indicators to the daily soybean chart below.
They are 9-, 20- and 50-day Simple Moving Averages (SMA), Bollinger Bands (light blue shaded area), Bollinger Band Width (chart with red line at the bottom), Candlesticks (red and green bars, each representing one day), and final, Volume. I happen to like these indicators because they can tell me dozens of important details and they can do this on any time frame and any market.
The first feature of this daily soybean chart is that the trend has changed as the market has quickly gone from a "SUPER-TREND" up to a short-term trend down in about 4 trading days. The 9-day SMA (red line) is now pointing down. The market has traded below almost every support line that I had in place with these technicals.
First, the market fell through the 9-day SMA and then in short order it traded below the 20-day SMA (green line). Although it has closed above the 20-day SMA (green line) so there could be a case that the mid-term upward trend is in effect, just barely.
Next we may see a close below the 20-day SMA (green line), the 9-day SMA will continue to point lower and the market will continue to trade below it. If we get a couple of closes below the 20-day SMA (green line) the cross of the 9-day down and under the 20-day as both indicators point lower as the market trades below the 9-day.
I see a "SUPER-TREND" down here taking place in short order, all because of what I believe to be the manipulation of the Chinese and the soybean market.
This is an opportunity to get in early on a bounce, to buy put options or bear put spreads in a 3 to 1 ratio with a call as a hedge for "insurance" in case soybeans trend up again. Also, there could be an abundance of opportunities to sell options or options spreads with protection in the form of futures or other option plays. However, you as a trader, should make sure that you understand the risks involved and have a well-funded account to collect premium.