Soybean Prices: Technical Analysis – Soybean demand increased

By IFCMarkets

Soybean demand increased

China increased soybean imports by 20% to 19.5 million tonnes in Q1. Will the soy prices rise?

China is the world’s largest purchaser of soybeans. In 2015/16 agricultural season, it imported 83 million tonnes. According to forecasts, in 2016/17 season, soy deliveries to China were expected to increase only by 3.6%. However, as we can see, the Q1 indicator is much higher. In the 2nd place after China, with a huge lag, is the EU, which annually purchases a bit less than 15 million tonnes of soy on the world market. It can be noted that Chinese buyers strongly affect world prices. Note that in January – March 2017, the imports of soybean meal to China rose by more than 3 times and amounted to 27.7 thousand tonnes. Another factor for the growth of soy prices may become the negative impact of flooding on the crop in Argentina. The Buenos Aires Grains Exchange reduced the forecast of soybean crops in 2016/17 season to 56.5 million tonnes from the previously expected 57 million. According to the estimates of the Government of Argentina, floods destroyed 750 thousand ha of soybean plantings. This country is the 3rd world’s largest producer of this crop after the US and Brazil.

On the daily timeframe, SOYB: D1 is moving sideways. Currently, the prices are growing repulsing from the lower boundary of trend. The further price increase is possible in case of an increase in demand in China, alongside with the crop decrease in Latin America and North America.

• The Parabolic indicator gives a bullish signal.
• The Bollinger bands have markedly narrowed, which means lower volatility.
• The RSI is above 50. No divergence.
• The MACD gives a bullish signal.

The bullish momentum may develop in case SOYB exceeds the upper Bollinger band and the resistance line of the uptrend at 981. This level may serve as an entry point. The initial stop-loss may be placed below the Parabolic signal, the Bollinger band and the two last fractal lows at 936. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop level at 936 without reaching the order at 981 we recommend cancelling the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

Position	Buy
Buy stop	981
Stop loss	936

Market Analysis provided by IFCMarkets