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Soybean Channel Buying Opportunity

May soybean futures have been moving in an upward channel since August. This channel comes after an aggressive rally and sizable pullback in 2016. On Feb. 28 the price has triggered a buy signal based on that channel.

The seven-month channel has provided support and a buying opportunity on a number of occasions, including September and October of last year, another opportunity in January, and now once again at the end of February.

Figure 1. May Soybeans Daily Chart

On Feb. 23 to 27 the price fell to channel support and then stalled there. In mid-day trading on Feb. 28 the price has bounced aggressively off support (although the price has given up some of its intraday gains).

The indication is that support has held, signaling a buying opportunity between 1031 and 1026. Watching for these types of setups in advance allows a trader to get into trades as the price starts moving to the upside after having contacted support. Seeing the trade in hindsight means waiting for the price to pullback to the entry area (which it may or may not do) after having already rallied.

Based on the rising channel, the upside target is near 1100. If entering the long trade, a stop loss can be placed below the Feb. 27 low of 1017.


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