The U.S. Department of Agriculture (USDA) has forecast a record soybean harvest for this autumn, contributing to the price decline. The U.S. alone has planted 86.1 million acres of soybeans for the 2024/25 marketing year, a 3% increase from last year.
World soybean production is expected to rise by 6.9 million metric tons to 428.7 million metric tons, with significant contributions from the U.S., Brazil, and Argentina.
China’s agriculture ministry raised its estimates for soybean imports in the 2023/24 crop year to 102 million metric tons in September.
The ministry said declining global soybean prices have greatly lowered import costs, helping to raise import estimates by 3.92 million tons.
That has raised estimated soybean crushing volumes by 1.35 million tons to 97.5 million.
👉 Pattern Analysis:
Left Shoulder: The price declines towards the lower trendline in early August, followed by a small upward move, which forms the left shoulder of the inverted head and shoulders pattern.
Head: The price then drops to a new lower low in mid-August, which creates the “head” of the pattern. This is the lowest point in the formation and often indicates a significant area where selling pressure has eased.
Right Shoulder: After forming the head, the price rises again and declines once more to form the right shoulder in early September. The right shoulder is usually smaller than the head, which seems to be the case here.
Neckline: The neckline is an important feature of the pattern, and in this case, it can be drawn along the highs from early August to the recent highs in September. The neckline is sloping downward, which might indicate a weaker pattern, but the pattern is still valid.
👉 Confirmation:
For the inverted head and shoulders pattern to be confirmed:
Breakout Above the Neckline: The price needs to break above the neckline with significant volume, which would confirm the reversal from a bearish to bullish trend.
However, based on the current price action in the chart, it seems that the price is near the neckline, and it has not yet broken above it. This means that traders should wait for a breakout above the neckline before entering a long position, as a failed breakout could lead to continued downward movement.
👉 Recommendation:
Bullish Scenario:
If the price breaks out above the neckline (around 1020-1040 levels), this would confirm the inverted head and shoulders pattern.
In that case, a long position could be considered, targeting the upper resistance levels (around 1100-1150).
Stop Loss: A stop-loss could be placed below the right shoulder (around 950) to manage risk in case the breakout fails.
Bearish Scenario:
If the price fails to break the neckline and instead reverses downwards, the bearish trend may continue within the descending channel.
In this case, short positions could be taken if the price breaks below the right shoulder (950) with the next target at the lower boundary of the channel (around 900-920).
👉 Conclusion:
The potential inverted head and shoulders pattern suggests a bullish reversal, but confirmation is needed through a breakout above the neckline. Without this confirmation, the prevailing downtrend remains intact, and traders should be cautious of false breakouts.
Happy Trading!
Commodity Samachar Securities
We Decode the Language of the Markets
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