US soyabean prices have been pummelled lately on the back of expectations for a record large crop, with soyabean futures falling to fresh four-year lows this week as yield-boosting rains descended across the Midwest. Combined with the approach of the South American soyabean-planting season next month, the general prognosis for a massive US crop is widely expected to continue weighing on US soyabean values for the foreseeable future.
Even so, a recent sharp climb in purchases of bullish November call options tied to strike prices between $10.00 and $11.00 per bushel suggests some traders are bracing for a pop higher in prices over the near term that could signal a rebound is in the offing for the soyabean market.
While most soya market participants expect the soyabean market to remain mired in a downward grind for the medium term, some traders are betting that prices will snap higher over the shorter run to break the recent losing streak. And there are a number of technical as well as fundamental factors that could cause such a contra-trend development.
From a technical analysts' perspective, November soyabean futures are fast approaching oversold status on the charts, with the widely tracked Relative Strength Index dipping under 32 on its 0-100 scale, where any reading under 30 is viewed as oversold and any reading above 70 is deemed overbought. The last time the November soyabean RSI slipped to 30 was around July 22-23 - shortly before prices underwent a five-day, 30-cent rally fuelled mainly by technical buying. Another closely watched chart gauge is the Slow Stochastics indicator, which again is currently registering its most oversold status in around a month, and so is being interpreted by many chart trackers as indicative that a short-term corrective rally in soyabean prices may be looming.
In light of the trend in technical indicators that suggest November soyabeans may be overstretched to the downside, several traders have racked up positions in the options arena that are geared toward gaining in value in the event of any push higher in the underlying soyabean market.