Leave Your Emotions Out of This Soybean Rally

May 18, 2016 04:00 AM

Soybeans rallied again on Tuesday, pushing up prices to close at $10.80 for July futures. When that sort of rally happens, it's hard not to get caught up in all the excitement.

But you need to try, according to market experts. “Markets do what they are going to do, but if we go back to basics, markets are driven by two emotions: fear and greed,” said veteran trader Todd Horwitz of Bubba Trading, who joined Chip Flory on Market Rally Tuesday to discuss how to ignore emotions to make better marketing decisions.

Psychology is an undeniable factor in market movements, according to Horwitz, who also urges farmers to leave those feelings at the door when dealing with marketing decisions. 


“Typically, emotional decisions are wrong,” Horwitz said.

Soybeans: A Parabolic Market

What do farmers need to know to avoid  doing that? It helps to know what is happening in the market. Current, the soybean market is following what Horowitz calls a "parabolic" pattern, which is when the market slowly moves upward and then skyrockets upward. (According to Flory, a parabolic chart will look like an upside-down hockey stick.) 

Those movements are being driven by outside factors and some fear in the market. “The dollar and what’s going on in the general economy is having a force on the grain,” Horwitz said. “Looking at the charts, you’re seeing the emotion from people being caught short.”

He said that a parabolic market typically resolves itself in two ways: the movements go the opposite way or sideways. “You’re seeing natural trading right now,” Horowitz said. “If we break out to the upside, we could see this market go much higher. This is where the cooler head has to prevail.”

Listen to Horwitz and Flory's full discussion on Market Rally by clicking here and choosing the May 17 show. 

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Spell Check

Western, NE
5/18/2016 09:18 AM

  Good time for farmers to hedge if they're at or near their cost of production.

Chappell, NE
5/18/2016 10:55 AM

  "It's hard not to get caught up in all the excitement"?!! Oh boy, stand back!!! A couple more weeks like this we might get to break even.


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