SINGAPORE: The CBOT soybean first month may retrace into a range of $8.09-1/4 to $8.53-1/2 per bushel, before retesting resistance at $9.17-1/2 next quarter.
The resistance is identified as the 161.8% projection level of a downtrend from $16.30, based on the fall from the September 2012 high of $17.94-3/4 to the April 2013 low of $13.54-1/2.
Strengthening the resistance is a congestion area formed between December 2018 and February 2019. The contract apparently failed to break $9.17-1/2 in its first attempt. It may accumulate enough momentum by retracing into $8.09-1/4 to $8.53-1/2 range.
The long-shadowed hammer forming in May strongly suggests a reversal of the downtrend from $17.94-3/4, which could be well broken down into five waves. The bullish divergence on MACD also supplements the bullish candlestick pattern.
Problem is a medium-term uptrend is generally very weak and slow at its first stage. Unless the contract closes above the resistance at $9.17-1/2 by end of this month, the hammer itself won't work as a convincing reversal signal.
A break above $9.17-1/2 could lead to a gain into the range of $10.21-1/2 to $10.85-3/4. On the weekly chart, a retracement analysis on the short downtrend from $10.71 to $7.80-1/2 reveals a resistance at $9.25-3/4, the 50% level, which makes a break above $9.17-1/2 more difficult. Most likely, the contract will retrace first before resuming its rally.
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** Wang Tao is a Reuters market analyst for commodities and energy technicals. The views expressed are his own.
No information in this analysis should be considered as being business, financial or legal advice. Each reader should consult his or her own professional or other advisers for business, financial or legal advice regarding the products mentioned in the analyses.
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