Tuesday Technicals – Soybean Oil

This post is a follow up from our November 12th post, Soybean Oil Technical Analysis.

Time To Buy Bean Oil 

One of the nice things about Elliott Wave theory is that you don’t always have to have the exact, correct wave count to be right, or more importantly, make money.  As long as you can identify the trends by counting 5’s and 3’s, you can be on the right side of the trend.  The exact, correct count will always come later as Elliott Waves are a market descriptor not a market forecaster.  Because Elliott Wave theory is rule-based defined by a specific set of rules, we can use deductive reasoning to apply the market descriptor as a market forecaster with a set of probabilities.

Although our Soybean Oil analysis from last month was not exactly correct, being able to identify the overall trend allows you to be on the right side of the trade.

Below are updated charts for our bullish outlook.

  • Momentum on the hourly chart confirms the new high, and suggest there are more highs to come.
  • On the daily chart, you can see that wave (1) is a leading diagonal. It should be noted that a guideline of Elliott Wave theory is: “within an impulse, if wave 1 is a diagonal, wave 3 is likely to be extend”.  Because we expect wave C-circled to be an impulse, and wave (1) is a leading diagonal, we then can expect our current wave (3) to be an extended wave.  This would be a minimum 1.618 Fibonacci multiple, but you should not rule out a 2.0 or 2.618 multiple for an initial upside target.
  • The weekly chart also shows the most recent high is confirmed with momentum and we can expect higher prices in the future.
  • Looking at the Relative Strength Index, we can see the Bull Market Support (40-50) has held on the price pullback. This was referenced in the previous post as things to look for to confirm the outlook.

Our bullish stance started months ago.  If you have not been aggressive in covering your edible oil needs, you should be aggressive on any pullbacks.

January Soybean Oil Hourly Chart
January Soybean Oil Daily Chart
Weekly Continuous Soybean Oil Chart