Demand for animal and plant protein continues to grow across the world.
Soybean Meal has been in a protracted upward trend dating back to early August of last year. In fact, the recent 10% decline is the biggest retreat we’ve seen since April of last year. As such, commercial traders, especially commercial long hedgers, those that need to guarantee their future supplies as a matter of doing business have begun their biggest buying spree since last August’s expiration; having purchased approximately 30,000 more contracts than they’ve sold over the last three weeks.
Chart Action
You can see the anxiousness of their purchases on this composite bean meal chart.
This type of professional buying in a market that is supported by macro-economic trends shouldn’t be ignored. We view this pullback as a buying opportunity. Furthermore, the current setup is a text book Commitment of Traders buy signal.
We’ve had a nice pullback within the construct of a clearly defined upward trending market. The pullback has pushed our short-term market momentum indicator into oversold territory. Commercial buyers are actively adding to their position which is supporting the market and maintaining positive commercial trader momentum. Finally, the market has bounced high enough to relieve the pressure on our short-term momentum indicator. The reversal signals a new swing low of $430.30 per ton which will serve as our protective sell stop point.
