Soyabean: Ideal time for harvesting profits
Vidur Pendharkar 26 June 2012

There is a strong likelihood of soyabean topping out before end of August 2012 in the price range between Rs3,850 andRs4,100. Thus, it would be prudent to exit longs in soyabean in any further rise even though it’s in a “new high” territory

Soyabean close: 3,746 (23/06/2012)

Market Trend

Short Term: Up 
Medium Term: Up
Long Term: Up

One can see in the daily chart of soyabean (spot) that the price has rallied from a low of Rs2,031 (8 October 2011) to the current levels of Rs3,746 (23 June  2012), a stupendous 84.50% rise in a period of slightly more than nine months. We will now try to ascertain from this movement whether soyabean in nearing a significant top in prices.

The movement in price is as under:

  1. The rally began from Rs2,031 and went up to Rs2,638 (Rs.607) in a period of 67 TD (trading sessions). This is Wave I of the rise.
  2. The 61.8% retracement of the rise from Rs2,031-Rs2,638 gave a downside target of Rs2,262 for the correction. This correction saw soyabean drop sharply to a low of Rs2,257 (Rs381) in a period of 15 TD (trading sessions). This was Wave II.
  3. As is the case, the Wave III was explosive and the targets as per the ACP (Alternate Cycle Projection) were Rs3,471 (ratio of 2) and Rs3,836 (ratio of 2.618) and PCE (Price Cycle Expansion) were Rs3,620 (ratio of 1.618) and Rs3,852 (ratio of 2). The actual top fell into this price window when it made a high of Rs3,736 (3 May 2012) a rise of Rs1,479 in 80 TD (trading days). This was roughly 1.272 times (85 TD) the rise in Wave I of 67 days.
  4. Wave IV (13 TD, a Fibonacci number) was almost equal to Wave II (15 TD) in time. Interestingly the decline from Rs3,736-Rs3,132 (Rs604) in price was approximately 1.618 times the decline in Wave II (Rs.381).
  5. From here the Wave V began and is now 32 TD old during which the price has rallied by Rs644 from Rs3,132-Rs3,776 which is higher than the rise witnessed in Wave I from Rs2,031-Rs2,638 (Rs604). The rise in percentage terms in Wave I from the low Rs2,031 was roughly 30%. If Wave V equals Wave I in percentage terms then the price should advance by Rs939 from the low of Wave IV of Rs3,132 to Rs4,071. Assuming that Wave V is 61.8% in time of Wave I, it should last 41 TD sessions from the low of Rs3,132 and we have already completed 32 trading sessions i.e. 9 TD still to go. If it equals Wave I in time (67 TD) then this rally still has 35 TD to go.

From the above it is very clear that we are nearing a very significant time/price window in which soyabean could make a significant top. There is a very strong probability that soyabean is likely to top out before end of August 2012 in the price range between Rs3,850 andRs4,100 or slightly higher before a sharp correction sets in. The oscillators are also in extreme overbought territory and also signaling a negative divergence. Looking at the overall picture it would be prudent to exit longs in soyabean in any further rise even though it’s in “New High” territory.

Soyabean is planted in the US ideally in May. These initial reports will also be available during the July/August period. The other interesting thing to note is that this commodity has invariably moved against the overall commodity pack which has been under pressure for some time now, hence an ideal situation for a top. On the other hand, it also implies that precious metals and energy might be nearing a bottom in the months ahead. Well, only time will tell but as they say, “It’s better to be safe than sorry”.

Note: The waves mentioned above are meant to be significant advance/decline in prices and by no means idealistic Elliot Wave patterns. They have been mentioned above for making it easier to understand.

(Vidur Pendharkar works as a consultant technical analyst & chief strategist at

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