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Price Pattern Indicates Decision Time for Soybeans

Throughout November, a mini head and shoulders pattern developed in December and March soybean futures (ZS).

The head and shoulders is typically viewed as a reversal pattern, yet this isn't always the case. When the head and shoulders is relatively small ("mini"), compared to the surrounding price moves, it also acts as a continuation pattern.

If the price breaks below the mini head and shoulders (1011.5) it likely means a top to the October rally is in place. The downside target is 925 to 920. This trade aligns with the longer-term downtrend.

October was a strong month for soybeans, so if the price rallies above the 1050 (1060 can also be used) the price will have broken above the descending trendline created on the right side of the H&S pattern. The upside breakout signals a continuation of the October rally, and provides a price target of 1125 to 1130.

Seasonally, soybeans tend to rally in December; a factor that favors an upside breakout. 

Figure 1. March Soybean Futures (ZS) - Daily Chart

soybeans-1.jpg (1)

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