This week’s sell off in the soybean market can be contributed to several factors. One of the main ones, according to Karl Setzer of AgriVisor, is that the soybean market was over extended and into overbought territory based on the Relative Strength Index (RSI).
“Typically we range between 40 and 70 percent—anything under 40 percent is oversold and anything over 70 percent is overbought,” said Setzer. “We saw soybeans climb up to 86 percent, so 16 percent overbought. We have corrected that and we’re now back down to 60 percent.”
The channel broke on the bottom side of the soybean contract, however there was a hang-up on the 20-day moving average. That means a lot of technical are starting to come into play.
“The profit taking just developed, and we’re starting to see a little bit of a back and forth trade because of that,” said Setzer.
One of the big factors that contributed to Thursday’s sell off was a lack of flash sales of soybeans.
“All week long they’ve been buying,” he said. “We’ve also seen big weekly sales to them, but all of a sudden maybe they’re backing off.”
Setzer said that there’s been chatter China might be close to getting enough soybeans in place until they can start purchasing from Brazil in the winter.
“We heard what they were buying, they were going to put those soybeans into government reserves and China has been doing that at$9 or $9.25, not $10.50,” he said. “We got overextended to the upside and our buying shrunk.”
While the trade war with China hasn’t been front and center in headlines, Setzer said it’s still going on and tensions are still building.
“We’ve had a truce or maybe a standing down with the trade war, but it’s not over,” he said. “We need to remember China is going to walk away from us if they can, and there’s fears in the entire complex that we’re getting to that.”
