How Much Lower Will Soybean Meal Prices Go?

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March soybean meal (ZMH26) futures present a selling opportunity on more price weakness.

See on the daily bar chart for March soybean meal futures that prices have sold off recently, to form a bearish head-and-shoulders top reversal pattern that suggests a near-term market top is in place. See, too, at the bottom of the chart that the moving average convergence divergence (MACD) indicator is in a bearish posture as the blue MACD line is below the red trigger line and both lines are trending lower.

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Fundamentally, China, a major soybean importer, has pledged to buy more U.S. soybeans, but that news appears to be factored into current futures markets prices. Traders are also thinking China may not be able to meet its pledge to buy 12 million tons of soybeans by the end of this year, especially as China presently has a large stockpile of soybeans.

A move in March soybean meal futures below chart support at $318.00 would give the bears more power and it would also become a selling opportunity. The downside price objective would be $295.00, or below. Technical resistance, for which to place a protective buy stop just above, is located at $328.00.

IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any trades and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.

Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%):

Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.

On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com