On October 06th, 2014 we wrote a post indicating the possibility that the soybean market could rally after aligning with Gann's 30 years cycle harmonic. On October 1st November beans bottomed at 904¢ and has rallied almost a whole dollar reaching today a high at 994 1/4¢.
2-day swings and stop loss
Figure 1 is a daily price-time chart for November soybeans[1]. It shows the 2-day swings as explained by W.D. Gann in How to Make Profits Trading in Commodities. It also has a stop loss calculation using the 2% rule, which works fine in the soybean market.
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| Figure 1 Daily prices for November soybeans futures. 2-day swing chart together with a stop loss calculation using the 2% rule. |
Our previous analysis indicated the possibility of a rally. As prices rallied and made a first reaction, breaking later the first 2-day swing at 955¢ was further indication that price could continue higher.
The 2% rule for stop loss works relatively fine in the soybean market. In an uptrending market it is calculated using the most recent highest daily low. The stop loss is placed 2% below that price. As an example, since the market bottomed on Oct, 2014 the highest daily low was made yesterday at 960 1/4¢. The stop loss should be placed 2% below this price or,
0.98 x 960 1/4¢ = 941¢
This rule is reversed in a downtrending market.
Summary
An update on the soybean market was made including a Gann 2-day swing chart and a 2% stop loss rule for November beans. The soybean market has rallied since it aligned with Gann's 30 years cycle harmonic on October 1st, 2014. More important harmonics are due for early and late November 2014, hopefully indicating a bigger trend change in the market.
UPDATE
Following we present an update on the soybean market including a chart for January soybeans.
November contract is about to expire. The most liquid contract is January 2015. The market has continued to go up since early October. January beans have rallied almost $1.5 since the October bottom.
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| Figure2 Daily prices for January soybeans futures. 2-day swing chart together with a stop loss calculation using the 2% rule. |
Figure 2 is a daily price-time chart for January soybeans showing 2-day swings and 2% rule stop loss order. As of today, stop loss should be placed at,
0.98 x 1006 1/2¢ = 986 1/4¢
Summary
The market has rallied as anticipated following the October bottom. As mentioned above, there are still important cycles due to turn in November 2014.
[1] Chart drawn using free charting software Gannalyst Professional 5.0 which includes several basic Gann techniques.
Update 3: Soybeans 2014 Fall Seasonal Low
Update 3: Soybeans 2014 Fall Seasonal Low
Nadiel Outis
Grain Market Analysis
An update has been made to this post. It includes a chart for January beans.
ReplyDeleteNadiel