Since petering out in late August soybean oil futures have lost approximately 11%. ?In the month of December futures have been unable to retake the 50 day MA, identified by the green line in on the chart below. It will take a settlement above that pivot point currently at 40.53 for an interim low to be confirmed.?
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Big picture it is my opinion that current soybean prices suggest farmers will plant more soybeans next year and without a major weather disaster (drought/freeze) domestically the US is setting up to see a massive build in inventories. That being said if soybeans trade lower it should cause an unwind in the soy complex and get soybean oil futures moving higher into 2014. Additionally a trade higher in Crude oil in the coming 60-90 days also should be supportive. Shorter term talk that the US Senate Finance Committee might extend the bio-diesel blender tax credit next year is a short term supportive headline that could lead to at least a bounce.?
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Buying May Soybean oil futures on or around 12/20 and holding to on or around 1/30 has been profitable 14 out of the last 15 years. Past performance is not indicative of future results. We are also finding support in recent dealings and gaining bullish exposure with futures at oversold levels and prices trading at their lowest levels in 39 months.?
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I?started?gaining?bullish?exposure with some clients today. My favored?strategy?is long futures and selling out?of the money calls 1:1. My?objective?is a trade to the 38.2%?Fibonacci?level…lifting?May futures?approximately?5% from current trade.?
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