Ramki’s Elliott Wave analysis giving the outlook for Soybeans appears in Forbes today
On 14th December 2010, Wavetimes had suggested that Soybean Oil Futures could travel as high as 59.68, and I had posted a sell recommendation around that target. The actual high was seen on 10th Feb 2011, and it would have been possible to pin point the completion of the 5th wave of the Wave V if one were trading this actively (see black colored numbers). From the price action, it looks like wave C of the correction has commenced, and any move below 55.20 would all-but-confirm continuation down to 48.30. Now short-term traders of Soybean oil futures need to know how to handle the risks, but the aim of this post is to show you the direction. To help you trade it requires a deeper commitment that I cannot make at this point. So good luck, folks. Ramki
Elliott Wave Analysis is always a work-in-progress. You can’t label a chart and command the market to obey your count! What you should so, instead, is to keep adjusting your count in line with the signals the market sends you. This does not mean a mindless switch from being a bear to a bull at the wrong time. If you have done your work properly, then you would have got the major direction for the current move right.
Take Soybean Oil Futures for example. Our outlook has been for it to go higher from the 50.71 level when we looked at it last on 29th November. Using our best judgement, we expected Soybean Futures to approach, but perhaps not exceed the prior high. Well, today we see that the previous high has been marginally exceeded. Remember, we never intended to sell until the time a swift downmove started. That was your main clue then. Remain alert for a top, but don’t sell too soon. Now that Soybean has moved higher, we come up with a new count. Take note that we haven’t done anything wrong. We are dealing with a market that has countless players in it, (don’t forget the weather when dealing with agri-commodities). This is not a light-bulb moment, rather we are looking at the picture in a new light!
Soybean could still abruptly turn, and should it trade below 51.50 directly, then the old count will kick-in again. But it is more likely that we edge higher, and perhaps around 27 Dec, there will be exhaustion around $59.68. If you see Soybean Oil Futures trade near there, you should SELL with a close by stop. This recommendation is giving you a level, unlike the previous one which said sell when it starts moving down aggressively. We are emboldened by the confluence of several factors described above. Good luck.
Finally, I am toying with the idea of making parts of this blog available only to premium subscribers! (yes $$ !)
Soybean oil futures have been behaving quite technically, and an alert trader could have spotted some easy low risk trades. Take a look at the first chart of CBT Soybean oil January delivery futures. This is a weekly chart. The first thing you notice is the price found very strong resistance at the 61.8% retracement level. This also happened to be a low sometime in early 2008 (look along the dotted line to the left in this chart). If one had placed a sell order near there, with a not far away stop, he could have pocketed 13% in just 2 days! But do all 61.8% pull backs deliver such fantastic results? They do, if there are complementing techical factors. Look at the 2nd chart, which is a daily chart. Here the ‘C” wave of Soybean oil price movement is shown to be exactly 200% of the “A” wave. When you have such a confluence of levels, then Elliott Wave analysis produces a more rewarding outcome. Finally, I would like to suggest that maybe we have witnessed an extending fifth wave in Soybean oil futures that finished at 55.41 levels, and hence the correction down should go down all the way to 43.50. But wait. Don’t rush out to sell! Often times, we get what is called a double-retracement once a fifth wave extension is over. We are probably in the middle of this 2nd retarcement. While it may not reach all the way to the high, be prepared to join in the selling as soon as a strong decline starts. That sell-off in soybean oil at that time will be mighty powerful, when it begings. Good luck.