Commodity Chart Of The Day: Soybean Oil

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 |  Includes: DBO, OIL, SOYB, USO
by: Matthew Bradbard

Commodity Chart Of The Day

Daily Soybean Oil

(click image to enlarge)

Click to enlarge

Over the years I've found that soybean oil, as the name implies, is influenced by the movement in soybeans and crude oil. Being we've just seen a major correction in both of these underlying markets, it makes sense that soybean oil prices have also declined of late. In the last two weeks, crude oil is lower by roughly 8%; in the last three weeks, soybeans are lower by 10%, and soybean oil has lost 9% within that time frame.

Now looking at the chart above for a trade, I think aggressive traders can probe longs. As you can see, the market is oversold and as long as the red support line holds on a closing basis, I think you can try to time this reversal. A close over the 61.8% Fibonacci level would confirm an interim low was established. While I do not feel prices will race back to their highs overnight, we should get a bounce out of here. This is a 60,000 lb. contract, so every point move equates to $600. Risk to reward, you're looking at $300-400/per with a $700 plus objective.

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.