Soybeans
Week 05: ZSH2021 Short Term BullishOn H4, the price has broken the down trend channel and making a Higher High.
From 27 January to date, the price movement is forming another flag on the higher band; also, to add some confluences, if we observed the Price Action on the candle stick, there were some rejection to go down.
Based on the above, I think the price will pick up some liquidity at $1,417 area prior going down.
Short term (1-2 days) will be bullish as we are still in bullish flag area.
Week 04: ZSH 2021 We are entering a ranging weekLet's keep it short, this week the price will be in ranging mode.
The range is between $1,338 to $1,280.
If you have shorted earlier, you can take profit some of your positions and keep some until it hits full TP at $1,280.
If you are a speculator, now it is a good time to Long (buy) the market, but you must exit at $1,338 area; then switch to Short the market.
In general, when the market is in ranging, we can scalp it Up and Down.
Trade wisely, Trend is your friend.
US Presidents vs. Soybean PricesSimple soybeans vs US. Presidents chart to see if there are any trends worthy of paying attention to.
Week 03: ZSH 2021 The "Head" is forming, we are looking to shortWeek 03 analysis for ZSH 2021 .
The price is now ranging at the lower band of the trend channel, and on the structure wise, there is no Higher High forming.
It indicates the formation of the "head" and sellers are starting to jump in the market.
Our key level remain at $1,370 and once the price passed below that level, our probability to short is higher.
Stay tuned.
Week 02: ZSH 2021 Uptrend Channel, waiting for a breakApology for the late post.
Week 02 for ZSH 2021 is still bullish looking. Yesterday on H1, we can see the price movement candle by candle that there were no sign of weakness. In the last hour of market, it created a strong rejection and buyer jumped in with a significant momentum.
Let's see on the overall picture in H4, the movement is still within the Uptrend Channel, we only can short the market when we see a break at $1,370 level.
As at I wrote this, from H4 down to M5; there are still no sign of Seller coming to the market.
Buyer is still dominating the market, be cautious if you plan to long the market.
No trade call for this week.
-SatayFX
Adding CORN to the Long Side Double bottom on CORN weekly, this is supported by the RSI bullish divergence signaling a reversal of the previous downtrend.
Agricultural Commodities Ripping! Food Prices to Rise in 2021!Ending my posts of major themes to look for in 2021, I want to end with the agricultural commodities. Particularly Corn, Wheat and Soybeans. The agricultural commodities are some of my favorite assets to trade, and I do not think many people pay too much attention to them. I focus on the three mentioned above, but you can also trade sugar, coffee, cocoa, orange juice (yes seriously), cattle, hogs, and pork bellies to name a few more.
Let me give you a quick run down on the ag commodities.
Corn is the most traded agricultural commodity, and is an important food source for both humans and animals. What makes Corn important is that it can be grown in a variety of climates and conditions, unlike the other agricultural commodities. Other uses include starches, corn oil and fuel ethanol. According to my handy dandy commodity handbook, approximately 35 million hectares are used exclusively for corn production world wide.
Just as Oil has different qualities (Brent, West Texas, Canadian West etc), Corn does as well. There are different grades but the most important are high grade number 2 corn and number 3 yellow corn.
The futures ticker for corn contracts is ZC. The top 5 producers of Corn in the world are: The United States, China, Brazil, Mexico and India (Canada makes it in 9th place).
Corn has had an amazing run since June. We will get to the why when at the end of this post, but pay attention to the commodity charts. These are all going to be LONG term weekly charts. You can see that Corn is breaking out, and in fact, will confirm a breakout with this weeks close, which occurs today. Lot of room higher to go in 2021. The breakout zone will be our support, and as long as we remain above, Corn moves higher.
Wheat is the second most produced agricultural commodity. Rice comes in at third for those that are interested. No country necessarily dominates wheat production a la Saudi Arabia with Oil and Kazakhstan with Uranium.
China, India, Russia, the United States, and France produce the most wheat in the millions of tons. Canada, Australia, Germany, Pakistan, and Ukraine also boast significant production.
The future contract ticker for Wheat is ZW.
Wheat on the weekly is setting up to breakout. Just like Corn, we would confirm a breakout on the weekly chart by the end of today.
Finally, Soybeans. Perhaps the more ‘mainstream’ financial media agricultural commodity that has seen plenty of coverage due to the US-China trade deal. Part of the phase 1 deal was for China to increase their purchases of US Soybeans.
I am focusing on the the whole soybean, but most soybeans are used for soybean oil and soybean meal.
The United States dominates the Soybean market, composing 50% of the total global production. Brazil comes in second at around 20%. Many analysts predicted Brazil to be the big winner in a US-China trade war spat, as China could look to Brazil for more Soybean exports.
The futures contract for Soybeans is ZS. Let’s take a look at the other traded forms of soybeans which have their own futures ticker.
Soybean Oil is a vegetable oil and is one of the most used culinary oil in the world. Soybean Oil is also popular as a biodiesel. Believe it or not, but there are cars that have engines which can convert from regular diesel to Soybean Oil during production. They are known as ‘frybrids’. The futures ticker for Soybean Oil is ZL.
Soybean Meal is a quick one. Whatever is left from the extraction of Soybeans into Soybean Oil can be converted into Soybean Meal. This is used for high-protein, high-energy food for feedstock for cattle, hogs, and poultry. The futures contract for Soybean Meal is ZM.
Soybeans have been ripping in 2020. Again, China demand and the US-China Trade war headlines play a large part, but there was some other factors which we will discuss soon. Just like Corn and Wheat, Soybeans is set to confirm yet another breakout with a weekly candle close today.
The agricultural commodities do not get the attention they deserve, and as you can see, they have made huge moves. For traders, they present a great trade opportunity due to the volatility, but also add on some more risk. Consider at least watching them if you do not want to trade them.
M readers know I am extremely bullish on the agricultural commodities and agriculture in general. Jim Rogers is the one who got me excited about this sector. His argument is that most young people do not want to become farmers anymore, and that the average age of farmers is well above 60. Governments may need to create larger incentives to get young people to take up farming.
I see some issues and challenges for agriculture, but will be rectified by human ingenuity. The first issue is soil. A lot of soil sucks due to the pesticides and other chemicals we use. If the soil is not great, the crop will not have the full dose of nutrients and could lead to health issues down the road. As many of you are aware, the organic food movement is a huge trend, and will grow year by year. Soil replenishment will be big. I have head some things in the past about zinc being used to replenish soil, particularly in California. Phosphorus and Potash also come in mind. In fact, some foresee a phosphorus faming crisis.
A big issue for farming has been climate change. Obviously farming is cyclical. Winter has been lingering longer, especially on the East Coast. Farmers tend to await for certain birds to return to let them know Spring is here and it is time to plant crops. But Spring has been coming later while Winter lingers longer. Climate change will continue to disrupt agriculture and this could lead to a shortage of crops.
In fact, this is the primary reason for the spike in Corn and Soybeans this year. Iowa is where the majority of these crops are grown in the US. Millions of acres were destroyed due to the storm in Iowa in August. This has led to spikes in agricultural commodities, and some say, points to a food crisis in 2021.
Finally, something not many people consider are the ramifications of green energy. This info I learned from Peter Zeihan’s book, “Disunited Nations“. Highly recommended for anyone with an interest in geopolitics and where the world is going in the future.
Green energy is coming. We all know it. Governments will be spending a lot for green infrastructure. Due to the fiscal policy required to combat covid, taxes need to go up. The best way is through green taxes because they know the people will not complain. Government will say these taxes are going to be used for green infrastructure which will aid in an economic recovery and creating jobs.
The issue, as Mr. Zeihan states, is that solar panels and wind turbines need to be put in areas that are very sunny and/or windy. These areas tend to be where the best agricultural land is situated. So nations would have to sacrifice agriculture for energy. In his book, Zeihan states that there only a few nations which can come out as winners in this predicament. China is not one of them.
Do not panic, a lot of these issues can be remedied. In house and Greenhouse farming can be a way to cope with the effects of climate change and unpredictable weather patterns. Vertical integrated farming can be a solution to allow for green energy infrastructure to be built in the best agriculture lands, and can also be a solution for nations that do not have much agricultural lands. So yes there will be issues, but human ingenuity will get us through it. The question is how long will it take?
I want to end of with Covid. It seems we are setting up for a food crisis next year. Tons of articles about supply chain disruptions due to covid and worsening food insecurity for many nations. If this winter turns out to be a dark winter due to covid cases, the likelihood of empty shelves increases.
A lot of this could also have an impact on the prices of agricultural commodities. Canada is already preparing for this. In Canada’s Food Price Report 2021, bread, meat and vegetable prices are set to rise between 3-5% in 2021. The average Canadian family will pay up to $700 more for food in 2021.
The agricultural charts are pointing to higher food prices. Covid and Climate will have impacts, and hence why I am bullish on this sector going forward.
SoyBeans (ZS1!) LONG; Long term BUYCBOT:ZS1!
.
Looks like it's headed >$15000, rather relentlessly.
This very well could get up there something like this;
Visualisation of diversification This is what your portfolio should look like. Then you will Always have some assets that gain when others lose and whenever something has crashed and started to turn around, you can just sell the assets that have gone well under the same period and buy more of the assets that have crashed.
Grain and oilseed markets summary 12/14Today we discuss how the grain markets weekly opening day closed and risk levels where our trades get invalidated
Week 50: Short Opportunity on ZSF 2021Weekly analysis for ZSF2021
Week 50: 07 December to 11 December 2020
Following up last week analysis, the Resistant level at $1,200 remained in tact and our key level at $1,161 had been penetrated.
Therefore, now we are looking to sell as the direction had changed.
Here is my personal trade call for this week :
Short now or Sell Stop at $1,154.00
Stop Loss (SL) is at $1,175.00
Take Profit (TP) is at $1,083.00
It gives us 3.47R
Disclaimer :
The analysis above for educational purposes only, I do not responsible for your losses. Please adjust your own lot-sizing according to your appetite.
If you are benefiting from my trade opinion, please buy me coffee.
As always, move your SL when you are in the profit zone.
Soybeans: Trending up, buy on dips...I think we have a nice setup to buy the dip in Soybean futures or using $SOYB. It's a rather big contract, so keep that in mind if trading futures.
There's a long term trend signal active, for many more months still, so any dip is a buy if you're patient enough.
I highlight a trend that reached its peak in the daily timeframe here, so, a retracement entry is likely to materialize in the coming days and weeks.
Keep an eye on it, don't miss out on the big gains to be had in this market.
As @timwest pointed out, fundamentals for Soybeans and the long term chart are ridiculously bullish now, so, it is going to be very hard to hold on to positions for long enough to reap the benefits, and specially hard to join the trend for most people. The droughts in Brazil are affecting crops, and there's a huge demand from China, since the soybean producing regions were affected by floods recently, there's also a big need for soybeans to produce pork in South America, like the huge farms they are setting up in the South of Argentina.
As a bonus, if the US wants to hurt China, their best bet is to make the food prices go up, specially Soybeans. They had been buying commodities for cheap for a long time until now. That might be changing already, and considering the expectations I have of rising inflation and interest rates, in a post Pandemic world, this is further fuel for the fire in this rally here.
Cheers,
Ivan Labrie.
Week 49: ZSF 2021 Still bullishWeekly analysis for ZSF2021
Week 49: 30 November to 04 December 2020
Here is the playbook for Week 49, overall it is still Bullish.
(a) Currently on H4, the price is forming a bullish flag with $12,000 is the current Resistance Level.
(b) It may not be a straight forward bullish; the real key level is at $11,161.50 (area).
What does this mean?
(1) If the price make a clean break on $12,000 then we put a Buy Limit at $12,000 area
(2) If the price just make a shy break on $12,000 level, then we are expecting either a False Breakout or another price compression.
(3) If the price cannot break $12,000 it is still Bullish, don't get trapped by thinking that the trend has changed. The direction is only changing after the price enters $11,161.50 and below.
Therefore, overall this week is still bullish bias; take a rational decision, don't get emotion involved.
Disclaimer :
The analysis above for educational purposes only, I do not responsible for your losses. Please adjust your own lot-sizing according to your appetite.
If you are benefiting from my trade opinion, please buy me coffee.
As always, move your SL when you are in the profit zone.
Soybeans - Short IdeaI have "bean" watching Soybeans for sometime now. I see price has entered an area of resistance, has hit a whole number of $12 and my heatmap indicator is showing divergence.
Price has fallen through my trendline.
I will be going short.
On the daily charts, a couple of shooting stars are present.
Enjoy!
Week 48: ZSF 2021 No sign of weakness, key level is at $1,150Weekly analysis for ZSF2021
Week 48: 23 to 27 November 2021
From 1st June 2020 until today, Soybean prices has been very (strong) bullish, especially in November.
On the weekly Time Frame we can spot the decision level is at $1,150, however from the current price is still quite far.
There is no sign of reversal yet, even on Daily chart, momentum still slower, sporadic with some keen buyers trying to push the price higher.
Practically we have not seen any strong Sellers come to intervene, perhaps just like us and other traders, we just wait and see on how high the price will go.
It is wiser to wait, observe and we enter when there is a firm confirmation on the price.
No trade call this week, risky to long and not wise to short now. Stay Calm and enjoy the Black Friday shopping.
Disclaimer :
The analysis above for educational purposes only, I do not responsible for your losses. Please adjust your own lot-sizing according to your appetite.
If you are benefiting from my trade opinion, please buy me coffee.
As always, move your SL when you are in the profit zone.
Soybeans - Watching.Weekly Chart
I'm watching this chart for a fade in the future. A serious run up, caught some upside on this one. previously post.
Week 47: ZSF 2021 Short OpportunityWeekly analysis for ZSF2021
Week 47: 16 to 20 November 2021
After a long rally, retracement was formed (in a mini down trend channel) and it broke to fill the Supply Zone.
There two ways to trade this formation:
(a) Aggressive Mode
Solely based on the Price Action and we can reap better Risk Reward Ratio by sacrificing a small risk.
Sell Limit at $1,153
Stop Loss at $1,160
Take Profit at $1,124
RR = 4.14R
(b) Conservative Mode
We wait for the confirmation to enter, it is a very safe trade with a decent ratio.
Sell Stop at $1,139
Stop Loss at $1,152
Take Profit at $1,124
RR = 1.31R
Use your own judgement and risk factor to decide.
My personal opinion, this week ZS will have a rather big movement and from there it will be many ranging days ahead.
If you are familiar with "Cancan Setup", you may know what I am referring to.
Disclaimer :
The analysis above for educational purposes only, I do not responsible for your losses. Please adjust your own lot-sizing according to your appetite.
If you are benefiting from my trade opinion, please buy me coffee.
As always, move your SL when you are in the profit zone.
Week 46: ZSF 2021 Buy at retest levelWeekly analysis for ZSF2021
Week 46: 09 to 13 November 2021
Market was pushing the price higher and made a new Higher High last week.
The Head and Shoulder formation was not happening, on Friday the momentum was slower and today not much happening too in Asian session.
Overall trend is still bullish, but don't jump to the band wagon now; we better wait at a retest level to long.
My personal trade call for this week :
Buy Limit at $1,084
Stop Loss at $1,061
Take Profit at $1,130
RR = 1.92R
Special note :
As there is no reference on the Take Profit, we do not know how bullish it will be.
My advise, watch for the Price Action in H1 and H4; they will give you an early warning whether to close manually or let it ride.
If I happen to watch it, I will update it here on comment section.
Disclaimer :
The analysis above for educational purposes only, I do not responsible for your losses. Please adjust your own lot-sizing according to your appetite.
If you are benefiting from my trade opinion, please buy me coffee.
As always, move your SL when you are in the profit zone.
Week 45: ZSF 2021 Consolidation PhaseWeekly analysis for ZSF2021
Week 45: 02 to 06 November 2021
Overall, this week I am very bearish bias.
There are two spots of level which give us a good profit ratio:
(1) Sell Limit at $1,065
(2) Sell Stop at $1,035
There is no trade call today (this week), just a few guidelines:
a. If you are shorting now or still haven't closed your trade from last week position, the best Take Profit level is at $1,036
b. If you are looking to sell, wait for the price to breach $1,035 or bounce to $1,065 or split your lot size with heavy on top.
c. Stop Loss is at $1,067 (close all your short positions if the price is closed at this level or higher)
d. Take Profit is at $1,000
e. Last advise, keep in mind that now the price is forming the head, it needs to form the right shoulder before going down.
Disclaimer:
The analysis above for educational purposes only, I do not responsible for your losses. Please adjust your own lot-sizing according to your appetite.
If you are benefiting from my trade opinion, please buy me coffee.
As always, move your SL when you are in the profit zone.
Week 44: ZSF 2021 Bullish compressionWeekly analysis for ZSF2021
Week 44: 26 to 30 October 2021
Soybeans is persistently soaring higher and higher, there was no sign of slowing down.
Even today, there is no strong seller sighted yet; looking at from the momentum movement, the market may show a sign of deceleration.
However, until we see a Strong Seller, then we can say that the momentum has changed direction.
Actually I won't rush to sell, because the data is not complete yet.
The only reason I will place a Pending Sell Order, it's because of the compression shape, or commonly known as ascending wedge.
Again, this is a risky trade, no reference to the left and let's speculate. We have a good RRR for this trade.
My personal trade call:
Sell Limit: $1,082
Stop Loss: $1,090
Take Profit: $1,047
Risk Rewards Ratio: 4.67R
Disclaimer :
The analysis above for educational purposes only, I do not responsible for your losses. Please adjust your own lot-sizing according to your appetite.
If you are benefiting from my trade opinion, please buy me coffee.
As always, move your SL when you are in the profit zone.
Market Update – 25/10/20 | FCPO, Sb, Sbo Oil, FX & OtheWeekend Market Updates & Analysis 25 Oct 2020
Note: If you would like to receive this the latest updates immediately without 3 days release, please search for my site Palm Analysis.
Recap
1) Let’s start the report with a review of last week’s update and market conditions. You can read last week’s report by clicking here: Weekend Market Update – 18 Oct 2020 | FCPO, Soybean, Soybean Oil, Currencies and Others
FCPO
i. On Point 19, 20 i and ii, 30 ii and iia, I said that both the bulls and bears have credible setup, which is classic trading range price action, and bears will likely try to push the market lower, and should the bears fail to resume their second leg down the bull will assume their case has more merits and will buy the pullback for a second leg up to retest the highs of the trading range.
ii. We did see a very strong sell off on Monday, which failed the following day and bulls came back for the second leg up.
Soybean
iii. On Point 6 and 7, I said that Soybean is still in a tight bull channel with strong buying pressure and we will likely see another leg up to form the 3rd leg up for a wedge pattern and a final bull flag.
iv. On Point 30 iii, I said that I was monitoring if we see another leg up to complete the 3rd leg of the wedge pattern to retest the 1080-1100 top of the trading range. So far we got that.
Soybean Oil
v. On Point 10 i, I said we will likely see bears attempt to push below the low of last week and we got that on Monday. I also said that both the bulls and the bears have credible setup, which is classic trading range price action.
vi. On Point 30 iv, I said that I would be monitoring whether the sell of last week was merely just a 2 legged pullback, before the second leg up in Oct resumes and we got that.
Dollar Index
vii. On Point 30 i, I was monitoring if Dollar have another small leg down to create a double bottom at 93 before rallying – (if it rallies at all).
viii. We got that and Dollar fell further than 93 to close at 92.767.
ix. Take note that on my 4th Oct 20 report that you can read here (4 Oct Report), On Point 43 i and ii, I said “that sometimes the 3rd leg up can be very inconspicuous and may just be a 1 bar up and when that happens, the market will likely conclude that this bounce from Sept is likely just a bear rally, and will sell the bounce for a 3rd leg down to test 92 area (recent lows) and then 88-90 area.”
x. So far in the DXY, instead of a 1 bar, we got a 3 bar bounce on the 13th to the 15th, and price started to sell off to the 92 area after that.
What’s up ahead?
Soybean Monthly
2) So far, the monthly bar is a strong bull bar trading near its high at the 1080-1100 top of the multi year trading range.
i. There are 5 more trading days next week, and the bulls wants the bar to close as high as possible, while the bears wants the bar to close below the middle of the bar to reduce the bullishness.
ii. Currently we are looking at 3 strong bull bars on the monthly chart, and a tight bull channel which started in May/Jun period.
Soybean Weekly
3) So far on the weekly chart, the week closed as a bull bar closing near its high with a small tail above, and closed near the top of the multi year trading range of 1080-1100.
i. As I said in my report last week, we are likely looking at a wedge pattern forming, and the current bar has formed the 3rd leg up by breaking above last week’s high.
ii. By closing on its high, I think we are likely to see slightly higher prices next week.
iii. Secondly, looking at the range of the first leg up and the second leg, I think its likely we will see at least another bar up on the weekly chart too.
iii. The bulls wants to close strongly above the 1080-1100 range next week, while the bears wants the breakout to fail, and for prices to close back below the 1080-1100 range for a 2 legged pullback after a wedge pattern.
Daily Soybean
4) So far on the daily chart, price is still trading in a fairly tight bull micro channel.
i. The only noticeable selling pressure is the sell off at the end of Sept, and the 12 Oct 1 day pullback. Other than that, there hasn’t been much selling pressure and no strong consecutive bear bars.
ii. Price traded below the low of the prior day on the 22 Oct, but found more buyers instead of sellers which was expected in such a bullish market.
5) I think we should continue to see slightly higher prices in Soybean as price moves up to complete the wedge pattern and then a pullback after that.
i. We also have to look at the Dollar and other factors which we will cover below.
Soybean Oil Monthly
6) So far on the monthly chart, the bulls have been able to push higher after a failed break below Sept’s low earlier in the month.
i. We are approaching the final trading week of the month. The bulls wants the bar to close near the high and above the middle, while the bears on the other hand wants the price to close below the middle of the bar and as low as possible.
ii. Bulls are looking for a re-test of the recent highs and multi year top of the trading range around 35.50-36 area, and close strongly above it.
iii. The bears on the other hand are looking for prices to fail and close lower for the month.
ii. We will have to monitor how the monthly bar closes next week.
Soybean Oil Weekly
7) The weekly bar closed as a strong bull bar closing near its high with a prominent tail below which makes it likely we will see at least slightly higher prices next week.
i. This week started off by the bears selling below the low of last week, which failed and traded back up to close the week strongly.
ii. The bulls see the second leg up case has more merits at this point.
iii. Taking a measured move up of the first leg, the bulls would probably have a target around 35.25, which is very near to the multi year top of the trading range 35.50-36 area.
8) I’m slightly more favorable to the bull’s case for a second leg up and will be monitoring if they get their target of 35.25 next week.
i. While I’m slightly favoring the bull’s case, I want to also be alert to any possible failed breakout – meaning price breaks above this week’s high and then trade back lower and form a reversal bar.
ii. This would then form a double top setup with the Sept high for the bears.
Soybean Oil Daily
9) The bears tried to form the second leg down on Monday and failed, and prices reversed up higher.
i. I think its fair to say traders will be looking if the second leg up to 35.25 form as expected. If it forms, then its within expectations. If it fails, then it says a lot about the lack of strength of the buyers.
ii. With the buying pressure stronger than the selling pressure, I’m slightly more favorable to the bull’s case at this moment.
Dalian Palm Olein Monthly
10) So far on the Dalian Palm Olein, the monthly chart has a moderate bull body with tails on top and below the bar.
i. 5 more trading days to go next week until the monthly bar closes.
ii. The bulls wants the bar to close near the high of the bar, while the bears wants the bar to close below the middle as low as possible.
iii. Currently on the monthly chart, price is still trading in a tight bull channel, which is a sign of strength. We will have to see how the monthly bar closes next week.
Dalian Palm Olein Weekly
11) On the weekly chart, last week closed as a big doji bar, around the same area as the week before that.
i. We can see prices consolidating in a large trading range near the high of the multi year trading range between 6500 and 5700.
ii. In a trading range, traders buy low and sell high, and;
iii. When prices are in a trading range, traders reverse from buying to selling every few days, and credible setup tends to disappoint both the bull and bears.
iv. The production for CPO is lower this month so logically, we should see higher prices for Palm Olein too.
v. If we do not see this happen, this is a potential red flag for next week. Something to watch out for.
Dalian Palm Olein Daily
12) On the daily chart, after the strong move up, price seems to be forming a triangle pattern since the sell off at the end of Sept.
i. Last week, the bears attempted to resume the second leg lower on Monday and failed, and price has since reversed up.
ii. Traders now expect to see the second leg up from the 30 Sept to 15 Oct first leg form.
iii. If it forms and re-test close to the recent highs fo 6500, then it is within expectations, but;
iv. If it fails to form, that would tell us a lot about the lack of strength of the buyers.
FCPO Monthly
13) So far the monthly bar had a bull body which followed a failed breakout below Sept’s low with a tail above.
i. There are only 4 more trading days in the month due to the Birthday of Prophet Muhammad holiday next week.
ii. The bulls wants the monthly bar to close near the highs, while the bears wants the monthly bar to close below the middle of the bar.
14) So far, prices has been in a 2 month’s trading range between 3100-2680, consolidating near the highs of the multi year trading range.
i. In trading ranges, traders sell the highs and buy the lows.
ii. So I will be monitoring if we see selling come in again as we approach the highs closer to 3100.
Weekly FCPO
14) The weekly bar closed as a bull bar near the highs with a prominent tail below.
i. The bears attempted to resume the second leg lower on Monday and failed and prices reversed up.
ii. Currently, it looks like the bull’s case for a second leg up to a measured move around 3100 has slightly more merit.
iii. If price reach there, buyers will then want price to break above the top of the multi year trading range of 3150-3200.
iv. The bears on the other hand wants prices to fail near the top of the trading range for a Double Top with retest with the Sept highs.
15) With last week’s failed bear breakdown, and this week closing near the highs, we should see slightly higher prices next week.
i. I see a potential measured move to re-test the Sept highs around 3080-3100 on the weekly chart and will be monitoring if we get this next week.
Daily FCPO
16) On the daily chart, after the failed breakdown on Monday, we are now looking at the second leg up from the Oct 5 to Oct 13 first leg up forming.
i. This current leg up is more choppy with more overlapping bars as compared with the first leg. That tells me that the conviction of the bulls are maybe not as strong as the first leg.
ii. I see a minor second measured move up within the second leg with a target around 3050.
iii. Take note that the first leg high stopped around 3020, and the weekly measured move up is around 3080-3100.
iv. With so much measured target above, and prices trading near multi year trading range highs, I will be monitoring if we start to meet into some headwinds for prices. Just something to watch out for, especially if Dollar starts to strengthen next week.
Other issues effecting Palm Oil
17) i. Production should be coming in lower for the month between 5% – 10% for the whole of Malaysia
ii. Exports so far looks not bad. Even if it is slightly higher or lower than Sept, you have to remember Sept was up 12-13% against Aug.
iii. So far no rain and no floods.
iv. News in the media talked about emergency measure by the Govt, but I expect palm industry to operate as per normal except Sabah side.
Let’s look at the currencies.
Dollar Index – DXY
18) So far for the Dollar Index, price traded lower as I suspected it would, and broke below the 93 level.
i. So far, I still do not see it as super bearish, but probably a 2 legged pullback from the Sept 2 legged up move.
ii. What this means is that, we might still see a few more days lower for Dollar next week, but I will be monitoring if this 92-91.50 area holds.
iii. If it does, and price start reversing up after testing lower for a few more days, this is bad news for commodities like SB/SBO/Palm.
iv. What if 92-91.50 area fail to hold and prices continue to break down lower to 88-89 area? Then this would be supportive for SB/SBO/Palm prices.
USD/Chinese Yuan
19) The RMB strengthened against the Dollar earlier in the week and gave back most of it gains.
i. I would prefer to see the RMB continue to strengthen against the USD, but things are looking a bit overdone.
ii. I would be monitoring if we have a weakening of the RMB against the USD next week as this would not be good for commodities prices.
Indian Rupee/USD
20) The Indian Rupee also weakened against the USD last week and that’s not so favorable for palm purchase.
i. The INR weakened against the USD by 0.8% for the week. Luckily, MYR also weakened against the USD by 0.48% which offsets the weakness in INR by half.
ii. I would prefer to see a stronger INR against the USD and if this trend of weakening continues, it would be concerning to me.
USD/MYR
21) As I have said above, it was good that MYR also weakened slightly against the USD, which offsets the weaker Indian Rupee.
i. As an exporter nation, we want our buyers (Importing nations – China, India, Europe, Others) to have stronger currencies against a weaker local currency (MYR)
ii. If the our importing nation’s currency weakens, preferably, I would like to see ours weaken as much or more to offsets the price differentials.
iii. Otherwise, if the differentials grow too large, it might have an adverse effect on commodities purchases.
Other Factors to look at:
Crude Oil
22) Crude Oil traded lower last week.
i. In my past reports, I have said that I would have preferred to see higher crude oil prices as it reflects the health of the global economy.
ii. Higher crude oil prices indicate more cars on the road, more flying and more energy usage by industry for production.
iii. With the increasing Covid cases especially in the USA and Europe, this is starting to dampen the prices of crude oil as the expected demand drops due to lock downs and restrictions to business activities.
iv. If crude continues to trend lower, this would be a worrying trend for overall economic activities.
Other, Other Factors to look at:
Covid-19
23) USA just recorded a record amount of daily cases, almost 90k per day.
i. Remember we had a state election in Sabah and cases went haywire in Malaysia?
ii. Well, USA will be having a national election on the 3rd of Nov, and early election already in the process. I highly suspect this is going to drive up cases going into the fall/winter months – in line with what the experts have been warning us about.
iii. Cases in France, Spain and other EU countries are also ticking up with potential lock down in the UK.
iv. If cases continue to spike at an accelerating pace, we may see countries resort back to drastic measures like lock down once again and when that happens, it may also effect demand for Palm.
v. Can you imagine USA daily cases spike to 200k cases a day or more? Even if Biden wins, we might see a few weeks of lock down just for them to flatten the curve.
vi. Just something to watch out for.
USA Elections
24) I think we should also keep in mind of the USA election on the 3 Nov.
i. We may see a large move by the Dollar due to the election.
ii. If the Dollar spikes lower due to more stimulus expectation, then that’s fine, as that is supportive for commodities prices.
iii. But Dollar also has a tendency to strengthen like it did after Donald Trump won in 2016. That would be bad for commodities prices.
25) Why is this important?
i. Because we do not know how traders globally are positioning or whether they are hedging their positions.
ii. Would traders de-leverage and reduce their long positions in commodities prior to the election? or;
iii. Would they just hedge it?
iv. I honestly don’t know. But it is something we need to be aware off and to monitor if players in the industry start de-leveraging and reduce their positions ahead of the election less than 10 days from now.
Summary
26) I have covered a lot above, I suggest you to go through each of the section of the different products to get a better picture of what I am looking at because I’m afraid this summary may not do it justice or provide you with the clarity of my thoughts.
i. Soybean – I expect slightly higher prices for Soybean and will be monitoring if we get it.
ii. Soybean Oil – I am slightly favoring the bull’s case, but I also want to be alert to any potential failed break up or failed measured move up in SBO next week.
iii. FCPO – with production still tight, and rival commodities still strong, I also expect slightly higher prices next week to around 3020-3080-3100 area. Should we get there, good – within expectations. If we failed to get there? I would start to be careful because that means the sellers are potentially coming out to sell near the highs of the multi year trading near 3100.
iiia. If we do get to the measured target above, traders will then be looking if market can spike even higher, maybe towards the 3150-3200. I will take it 1 step at a time. Reach the targets first, then look at how the currencies are behaving and how the rival commodities are doing.
iv. Dollar (DXY) – the USD look weak, but it could potentially only be a 2 legged pull back only. That means, we might still see a few more days of down move. After that, I will be monitoring closely if we suddenly have a strong reversal up in DXY – if this happens, this is bad for commodities prices.
v. RMB – The Chinese Yuan continue to strengthen against the USD, but I feel like it is a bit overdone. I will be monitoring if there is a bounce there and RMB weaken slightly against the USD. If this happens, we might see some pullback in commodities prices especially the Soybean, Corn, Wheat products.
vi. INR – The Indian Rupee weakened against the USD, which is offset slightly by a weakening MYR/USD too. I would prefer to see a stronger INR. I will be monitoring accordingly.
vii. Important note – should prices move higher within expectation, I would want to be on the lookout for sudden strengthening of the Dollar which might cause prices to fall.
So far that’s all to this week’s report. If there are any major changes, I will update again accordingly.
Till next week.
Best Regards and trade safe.
Tech Trader
