Richard L. Weissman
We are now trading at what could prove to be a low risk entry level for Soybean bulls. First, on October 3rd the CME Group November Soybean Futures contract successfully tested and held the 50% retracement level measuring from the June 4th low to the September 4th high. Secondly, the 9-day RSI is still at somewhat oversold levels and most importantly, the long-term trend as defined by the 200-day simple moving average suggests the bull trend may still be intact (see Figure 1).
Although trading prior to the release of a major report like Thursday’s USDA is safest with limited risk long option strategies, for those with a greater risk appetite purchasing November Soybeans at the $15.25 area with stops around $15.04 area might prove an interesting opportunity.
If filled at $15.25 area, a logical initial target for longs would be the $16.12 area which represents both resistance as well as a 38.2% retracement from September 4th high to the October 3rd lows (see figure 2). Note, that I would also suggest moving stops to breakeven if $15.75 area is reached.
Richard L. Weissman is a professional trader with over twenty years’ experience. He has provided private consultations and training to traders and risk managers for over fifteen years. He currently serves as a Senior Associate with the Energy Management Institute (www.emi.org), where he teaches trading and risk courses, which are co-sponsored by CME Group and the Intercontinental Exchange. In addition, he is editor-in-chief of Weissman Signals Inc. (www.weissmansignals.com), a newsletter covering the ETF, futures, and cash foreign exchange markets. Weissman’s first book, Mechanical Trading Systems: Pairing Trader Psychology with Technical Analysis was published by John Wiley & Sons in 2004. His second book, Trade Like a Casino: Find Your Edge, Manage Risk and Win Like the House, was selected as a Finalist for the Technical Analyst 2012 Book of the Year Award.