Sum-up of 12/26 soybeans trades

Today was the most profitable day I have had this year in trading soybeans. What a great way to finish the year!

Prices rose more than 46 cents from Monday's close. In the left (15 min) chart, the rise in soybean prices is clear and unidirectional. However, prices rose relatively little after the first 15 minutes of trading. On the 3 minute chart in the middle, you can see clearly the two trades I took today (one long, one short). The chart farthest to the right (tick chart) shows my last trade in the last few minutes of the trading day. While this small trade may appear minuscule on the 15 minute chart, it was a trade worth more than $300 per contract. And that's just the SMALL trade at the end!

Today was quite close to a textbook example of a typical trading day for soybeans. The day often begins with a short and small retracement or consolidation, following which a rise to higher prices occurs rapidly. After consolidation during the middle of the trading session, there is a sell-off and prices go down in the last 15-30 minutes of the trading day. This sell-off is almost certainly a result of traders liquidating their positions to take profits.

This chart is the most common pattern for trading soybeans.

There is one element of this chart, however, that is troubling to me. Perhaps due to light trading conditions following the Christmas holiday, the rise in prices today was parabolic in nature, and is usually subject to a sharp retracement, perhaps when regular trading volumes return after the first of the new year. This phenomenon may also manifest itself in a consolidation for several days, during which erratic trading conditions prevail. This consolidation pattern occurred just a week or two ago, following another parabolic rise in soybean prices. If past is prologue, perhaps this pattern will ooze from the market again this time.

This rapid price rise is highly reminiscent of the rapid rise of the EuroUsd in December 2004. In January 2005, the EuroUsd began a retracement that lasted throughout 2005. A rapid and unrestrained rise in prices like we have seen today in soybeans may also lead to a sharp snap back, like a rubber band that has been stretched too far, and now snaps back painfully as it slips from one's fingers.