Soybean price in overbought territory; here’s what to expect

By: Faith Maina
Faith Maina
Faith strives to break down complex developments so investors can make better informed decisions. When Faith is not immersed… read more.
on Dec 28, 2021
  • Soybean price has rallied by over 10% in two weeks.
  • The surge is founded on the ongoing supply concerns.
  • Investors will be eyeing the La Nina phenomenon in Brazil.

Soybean price is at its highest level since mid-August. The bull market is largely founded on the harsh weather recorded in South America and the subsequent supply concerns.

soybean price
soybean price

South American weather

Soybean price has been rallying since mid-December amid supply concerns. The dry weather in South America is the key underlying factor. Notably, southern Brazil and northern Argentina are the most affected areas. An extension of the unfavorable conditions in the countries that constitute the largest and third-largest producers of soybean worldwide will further boost the rally.

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Investors will further be eyeing the La Nina phenomenon that has begun to take shape in Brazil. However, if the region records substantial rainfall from now, farmers can still harvest a good crop.

Besides, soybean price movements have been impacted by the ongoing festivities. The Christmas holiday is usually characterized by low trading volumes and reduced liquidity as most investors pause on trading. Subsequently, the small number of traders in the market can significantly sway the price direction. As markets return to normalcy, the rallying will likely ease; even as soybean price remains on an uptrend.

Soybean price prediction

CBOT soybean futures have extended the week’s gains to trade at the highest level since mid-August. Earlier on Tuesday, it surged to 13.79-1/2 per bushel before pulling back to the current 13.77-1/2. Notably, the commodity has been on a rally since mid-December.

Over the past two weeks, soybean price has surged by about 11.33% from a low of 12.37-1/2. On a four-hour chart, it is trading above the 25 and 50-day exponential moving averages; which signal further gains in the ensuing sessions. Besides, it has entered the overbought territory with an RSI of 87.

In the short term, I expect soybean price to pull back while remaining on the current uptrend. From this perspective, it may drop to the psychological level of 13.50. A move below that level will likely place the support zone along the 25-day EMA at 13.30 or lower along the 50-day EMA at 13.08 before bouncing back.

As the upward momentum continue, it will likely remain above the resistance-turn-support zone of 13.00, which had been an evasive level since mid-September. On the upper side, additional bullish momentum may give the bulls an opportunity to break the resistance at 13.79-1/2 and push the price to the next target at July’s high of 14.12.  

soybean price
soybean price
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