Fundamentally, the double top is still a possibility, but we must see some selling - QUICK! Can the July soybeans (NYBOT:JSN14) make the necessary move for the bears like me? I think so. Now with the record world demand forecast for this year, higher U.S. acres, and many funds long heading onto the summer, the sell-off could come any day now. However, for the double top to pan out it needs to happen this week or we could be looking at a sideways trading market.
Informa will release acreage numbers tomorrow and according to ADMIS's Market View, "They (Informa) have been using 2014 U.S. soybean acres near 82.4 million vs. USDA 81.5." There has also been plenty of talk about a world record crop of soybeans outside of the U.S., so supplies look to be very, very, high. That could help a bear like me; it could also help my double top formation predictions come to life.
The 9, 20, and 50 day Simple Moving Averages (SMAs), the Bollinger Bands (BBs, yellow lines), and Candlesticks (red and green bars, each representing a day) have been added to the daily July soybean chart. These indicators can demonstrate dozens of important details, and they can do this in any timeframe and any market.
The first noticeable feature of this daily soybean chart is the fact that we have somewhat of a potential double top set up. In order for that to happen though, we need to take out the low of $14.41/bushel established on May 5th in the next 7 trading days or so. Up until now we were still on track for the double top.
The reason that this particular formation is taking so long to come to fruition is because of the bearish pay off. If it completes the double top we could be looking at a low of $12.20 to $12.40/bushel in the next 45 days.
This is an opportunity, not without commensurate risk, 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 rally and move up sharply, as well as to sell deep out-of-the-money call options and collect premium.