In the past 12 months, the price for soybeans (Sc1) have fallen more than 17 per-cent, and recently reached their lowest levels since November 2021, bottoming out at US$12.01 per bushel.
Soybeans are currently trading below their 50- and 200-period simple moving average, however there are signs for investors to be bullish about beans.
The MACD, or moving average convergence divergence, is a momentum oscillator calculated by subtracting the 26-period exponential moving average from the 12-period exponential moving average (EMA). When plotting the MACD, a second line referred to as the signal line is also plotted (the signal line is the 9-period EMA of the MACD). When the MACD crosses above the signal line, this is viewed as a bullish buy signal.
On Jan. 23, a bullish cross occurred for Soybeans, producing a MACD buy signal. The previous MACD buy signal occurred in October of 2022 and lasted 31 days. During this period, prices rallied 3.06 per cent.
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Leading up to the MACD buy signal on Oct. 12, there was consistent whipsawing with the MACD and signal line, despite prices moving steadily to the downside, like due to the volatility on down days compared to up days. Although the most recent MACD buy and sell signals have produced clear entry and exit points, traders should not rely solely on the MACD as a standalone indicator.
Looking at the Commodity Channel Index (CCI), which measures deviations of price from the moving average, we can see this indicator has been trending upwards since the beginning of the January. Values for the CCI often fall between +/- 300, with upper and lower bands to highlight overbought and oversold zones. Using an overbought level of +150, and an oversold level of -150, we can see the CCI recently crossed above our oversold threshold, signaling there is room for prices to move higher before we reach overbought territory. The CCI has not been above zero since November of last year, and crossing this level could confirm this bullish trend.
Investors are advised to do their own research before trading in any of the securities shown.
Stephen Donovan, MBA, is a Senior Customer Learning Manager at LSEG, covering cross-asset trading for the LSEG Academy.
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