TECHNICALS- US soybean breakdown turns bullish view bearish
Tuesday, 08 May 2012 16:55:57
By Carole Vaporean
NEW YORK, May 8 (Reuters) – U.S. soybean futures <Sc1> exhibited a clear bearish signal on Tuesday when they broke below a key trendline, rupturing channel support that has been growing since early 2012.
On the daily continuation chart, the trend break occurred at $14.58 per bushel, with technical selling accelerating on the break down.
At the Chicago Board of Trade, actively traded July <SN2> tumbled 27-1/2 cents, or 1.9 percent, to $14.38-1/4 a bushel. [GRA/]
Next downside targets now sit at prior lows of $14.13, $14.07 and a 50-day moving average that currently points to $13.99-3/8 per bushel.
Tuesday’s trend support breakdown was one of several bearish signals to emerge over the last week.
Adam Sarhan of Sarhan Capital said he sold soybeans on Tuesday once it broke below his stop-loss sell area of $14.56 and he is currently flat bean futures.
Soybean prices had traded in a well-defined upward channel since early 2012, advancing until April 27 when they reached $15.09, their highest on the continuation chart since July 2008.
But, Sarhan points out, prices quickly pulled off that high, marking the first technical indication that “something was wrong.”
“That was a classic upside breakout from a long side base. But, it was not a good sign that it promptly negated that break,” the analyst said, explaining that normally, a break higher should be followed by another move up, or at least a sideways pattern, to confirm the bullish view.
The second sign came with the Tuesday’s break of trendline support.
“That just confirmed that the bears are getting stronger and have taken control of this market in the short term,” he said.
A third bearish technical signal came when soybeans closed lower on the day they reached their 3-3/4-year peak.
“Whenever a market gets to a new high and on the same day falls and closes lower, that’s not a good sign,” said Sarhan.
Calling all three signals together, “a line in the sand,” he added that the tone in the soybean market switched from being overtly bullish last week to overtly bearish in the short term.
As long as prices remain below the trendline at $14.58, which now serves as resistance, the bearish view holds.
If bean prices jump back above the trendline, the bulls can regain the upper hand. By Tuesday’s close, however, prices remained sharply lower, extending earlier losses to $14.38-1/4 per bushel.
Otherwise, the bears will dominate and send prices even lower.
(Reporting By Carole Vaporean; Editing by Bob Burgdorfer)