Gann Global Financial

In the aftermath of a recent crop report Soybean Oil surged higher to close at 35.10 basis the nearest futures, exceeding the 3477 high.

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Soybean Complex  Analysis

Current trade action in the Soybean Oil is tracking the angle of ascent of the aggressive 1976 precedent. Hopefully that’s how things continue to play out. Of course we don’t know that but that would be a home run situation for subscribers..

If we were to replicate this advance, the 38 July call options would advance from our average entry price at 60 points to at least 800 points, which would be a 12:1 risk/reward. The 34′s would probably be in the neighborhood of 9:1 risk/reward. The 36′s, I think 11:1, and the 38′s would be the greatest risk/reward but obviously there is a long way to go, but so far so good.

Currently the value of the options is approximately a 135% advance from where we entered.

As far as the May futures contract, I’m watching the relative strength in the soybean oil relative to the soybeans and the soybean meal. After lagging both the soybeans and the soybean meal, soybean oil is actually up 18% off the 2966 low, soybeans 17% off the low, and soybean meal 15%.

I view this as a favorable development. One of the reasons I’m more bullish on the Soybean Oil  is that it was more over sold than either soybean meal or the soybeans.

Soybeans topped out in March of last year, as compared to the Soybean Meal and Bean oil which topped out in June or July.

Actually, into this December 5, 2009 low, that was the completion of a second leg down in a bear market. We’ve spent more time on the bear side of the equation on the soybean oil than we have in either the meal or the soybeans. By virtue of that, that is one of the factors that I felt would, as a result of the law of action and reaction, favor the soybean oil over the other two markets.

On a short term basis though, Soybean oil pushed above a recent minor high and is showing relative strength to the other markets is very favorable.