Soy Meal/Soybean Spread: Book the Profits!

All Good Things…

Must come to an end!  This includes profitable market trends as well.

The IMC blog stalked the Dec-Nov soy meal (x2)/soybean spread for a short sale setup last summer after it reached historically unsustainable highs.  The short sale campaign was finally initiated in late June when the spread closed below the rising 30-day Moving Average for the first time in two and a half months.

As the downtrend unfolded, the position was pyramided a couple of more times when we sold more spreads short at the start of August and even more at the end of August.

This put us in an initial short position at +$21,125 (premium meal), a second ‘add-on’ position at +$17,690, and a third and final ‘add-on’ position at +$14,202.50.  The average entry price point for the three short sales is +$17,672.50.

This Week’s Price Action

The Dec-Nov soy meal (x2)/soybean spread has exploded higher in the last couple of days.  Intraday, the spread is currently nearing the early September high.


Dec Nov Soy Meal (x2) Soybean Spread Daily

Furthermore, the spread close back above the 30-day Moving Average yesterday for the first time since July 1st.  It is likely to close above it again today, confirming a bullish trend change signal.

Add this to the seasonal pattern that shows a tendency for meal and beans to both establish major lows in October and you can see that things are now stacking up in favor of the bulls.  To that end, it makes sense to book the profits on this trade.

Trade Strategy:

On the three Dec-Nov soy meal (x2)/soybean spreads entered at +$21,125 (premium meal), +$17,690, and +$14,202.50, exit at +$14,202.50 or better or at the market-on-close, whichever occurs first.

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