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:
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 www.trend4casting.com)
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