The Bollinger Bands are Squeezing the Juice out of Grains
Soybean short swing trade:
The Bollinger Bands width has narrowed to 2.56% of price which is a level not seen in over a year. A new 6-month or greater low in bandwidth indicates that a volatility squeeze breakout is likely upon us. Similar volatility squeeze situations exist in wheat and corn but they both broke to the downside significantly last week. Wheat was -6.42% on the week, corn -4.21%, and soybeans lagged at -0.20%.
Soybean price reached the lower parabolic SAR which is a signal to short the volatility squeeze. The stop loss is positioned at the upper SAR for this trade. A stop above the 20-day SMA would be more conservative.
The overarching price pattern is a rising wedge with what appears to be a fake breakdown in late January. If we hold below the 20-day SMA it will roll over in 3 days.
Wheat shows a similar setup already occurred a couple weeks ago but it was a head fake to the upside. There is risk in wheat being at the recent low pivot for the 3rd time. It could moon from here like gold did after making a triple bottom. Note the gigantic head and shoulders.
Wheat:
Gold:
Note the lack of a Bollinger Band squeeze at the pre-moon triple bottom:
Corn also shows a similar setup, but there was no head fake, it just broke down out of the band squeeze.
Corn:
Soybean Crush spread:
It appears positioned for a big move in either direction. Seems likely to bounce back up in concert with a soybean drop. It’s in volatility squeeze territory as well.
Oil:
The mother of all commodities has an inverse head and shoulders continuation pattern suggesting more downside:
tldr; short soybeans
The Bollinger Bands width has narrowed to 2.56% of price which is a level not seen in over a year. A new 6-month or greater low in bandwidth indicates that a volatility squeeze breakout is likely upon us. Similar volatility squeeze situations exist in wheat and corn but they both broke to the downside significantly last week. Wheat was -6.42% on the week, corn -4.21%, and soybeans lagged at -0.20%.
Soybean price reached the lower parabolic SAR which is a signal to short the volatility squeeze. The stop loss is positioned at the upper SAR for this trade. A stop above the 20-day SMA would be more conservative.
The overarching price pattern is a rising wedge with what appears to be a fake breakdown in late January. If we hold below the 20-day SMA it will roll over in 3 days.
Wheat shows a similar setup already occurred a couple weeks ago but it was a head fake to the upside. There is risk in wheat being at the recent low pivot for the 3rd time. It could moon from here like gold did after making a triple bottom. Note the gigantic head and shoulders.
Wheat:
Gold:
Note the lack of a Bollinger Band squeeze at the pre-moon triple bottom:
Corn also shows a similar setup, but there was no head fake, it just broke down out of the band squeeze.
Corn:
Soybean Crush spread:
It appears positioned for a big move in either direction. Seems likely to bounce back up in concert with a soybean drop. It’s in volatility squeeze territory as well.
Oil:
The mother of all commodities has an inverse head and shoulders continuation pattern suggesting more downside:
tldr; short soybeans
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