Lower Chinese import demand is bearish for soybean prices
China’s soybean importers are delaying soybean shipment orders. Will soybean prices continue the decline?
Last week hedge funds raised their net short position in soybean futures by nearly 26000 lots to 62355 contracts, according to data from the US Commodity Futures Trading Commission. This is the largest net short in 14 months. At the same time, Chinese soybean importers are pushing to postpone or cancel cargoes as they incur hefty losses processing the beans into cooking oil and animal feed ingredients.
Losses are rising as prices for oil fall due to the flooding of China’s edible oil market with rapeseed oil auctioned from national reserves and by growing imports of other alternative vegetable oils. Falling Chinese demand for soybean imports is also bearish for soybean.
On the daily timeframe, SOYBEAN: D1 has been trading with a negative bias after retracing to the two-month high in mid-May. The price is below the 50-day moving average MA(50).
- The Donchian channel is tilted downward indicating a downtrend.
- The Parabolic indicator has formed a sell signal.
- The MACD indicator is bearish.
- The Stochastic Oscillator is rising from the oversold zone, this is a bullish signal.
We believe the bearish momentum will continue after the price closes below the lower boundary of Donchian channel at 913.7. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above the Parabolic signal at 957.9. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (957.9) without reaching the order (913.7), we recommend cancelling the position: the market has undergone internal changes which were not taken into account.
Summary of technical analysis:
Position: Sell
Sell stop: Below 913.7
Stop loss: Above 957.9