Soybeans Became Overbought, But Trend Still Up

12:00AM Jul 07, 2008
( )

November soybean futures at the Chicago Board of Trade were
poised to post a strong down day Monday, following the long
Fourth of July holiday weekend. History does show that the
trading week after the Fourth of July holiday is extra important
for the grain futures markets. Existing price trends can
accelerate or come to an end during this important time period.

The soybean futures market had become short-term overdone on
the upside, as suggested by the 14-period Relative Strength Index
(RSI) overlaid on the daily bar chart for November soybeans. Last
Thursday, the RSI was reading 76.82. Any reading above 70.00 does
suggest a market that is due for a corrective pullback in prices
very soon. On Monday morning the RSI was reading 65.53 based upon
overnight electronic trading.

However, the overall longer-term and shorter-term price
trends in the soybean market remain solidly up as prices last
week hit a fresh contract and all-time high of $16.36 3/4, basis
new-crop November soybean futures. It would take a close below
strong technical support at the last "reaction low" on the daily
bar chart to negate the present uptrend from the April low of
$10.45 1/4. That last reaction low comes in at the late-June low
of $14.73 3/4. Strong technical support also comes in right near
that last reaction low, at the March high of $14.73 1/4.

A close above last week's contract high of $16.36 3/4 would
provide the bulls with fresh upside technical power to suggest a
run at psychological resistance at $17.00, or above.