Soybeans: Continuing bullish price action

August 24, 2016 09:35 AM

The low in 2015 is a bullish “spring of the 2014 low.” Therefore, the low in 2015 also ends the decline from the high in 2012. As an aside, it is important and interesting to note, the Dollar Index started its rally in mid-2014.

Subsequently, soybeans started a renewed decline after May 2014, which bottomed in 2015 with the spring.

Importantly, the spring had a good response, [i.e. the rally from March 2016 to June 2016.]  Additionally and importantly, this positive response to the spring created separation, giving  price action room to decline again, as a retest / higher support to the spring.  Therefore, the support in August 2016, while developing within a decline, nonetheless, has bullish potential, within the larger analysis, as a developing retest and higher support, to an important preceding price action [i.e. the spring].

Continuing with the aside on the dollar, it should be noted that the Dollar Index has been declining since December 2015. Therefore, if bean prices soon turn up again, as the long term analysis indicates is probable, bean prices would be positioned to benefit from a cheaper dollar. Is this linkage another positive indication for “reflation” and commodities in general?

Changing time frames from the monthly chart to the weekly chart, several important analytical observations can be made. First, remember the monthly price bar for July closed at its low, after an intra-month [see weekly price action for a more detailed breakdown] correction. An intra-month correction [July] that closes lower is usually bearish price action. Both the intra-month rally that failed plus the monthly close, demonstrate at least near term, bearish price weakness. Nonetheless, three weeks of price action in August has not been as negative as price action in July.  Therefore, the “selling pressure,” which was present in July, has diminished. The ability of prices to remain unchanged, with two thirds of the trading month, for August, over, is prima facie evidence of support, but nonetheless, questions remain.       

The first week in August stopped the decline because the weekly volume declined, which positioned prices to rally to this point in August.  The August rally has carried prices upward, but the rally has reached important resistance [i.e. ice.].

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About the Author

Robert Burgess has been a broker and trader, and published the Burgess Technical View, a newsletter featuring his technical views on stocks, bonds and commodities, which developed an extensive subscribership, which included large financial institutions, pension funds, and Fortune 500 companies.  He continues to keep a watchful eye on markets.