Complete soybean about-face

I thought that soybeans were looking a bit overbought in my previous post. At approximately 1:00 p.m. EST, a sell-off began that would have wiped out all bullish profits for the day for anyone that held a position after the peak in prices. This is why it is so critical to monitor trades constantly.

Fortunately, I was able to not only liquidate my long position with good profits, but also go short for the last hour of the day. I had a few small losses on the short side (at the green candles in this chart), but benefited from the overall trends of the day, cutting my losses quickly and shorting as the reversal intensified.

Note again that the Klinger indicator showed a leading divergence that hinted at the upcoming sell-off.


In the second, larger chart, I have shown a 5 minute chart of soybeans for the entire day. As a swing trader, I work at changing directions on a dime when market sentiments change. I don't typically use 5-minute charts. This one is only shown because I can show the entire days' trading in a single screen capture. How do I know when the market sentiment has shifted? I look for two things:

1. a change in trend on the 30-tick chart, as indicated by a lower low and lower high
2. a crossover and close below the 8-period Exponential Moving Average on the next higher time frame (in this case the 3 minute chart)
3. reversal agreement/confirmation with the Klinger volume indicator
4. no nearby support or resistance. I use dynamic support/resistance using Bollinger Bands and various moving averages
   

In the above case, the MACD had also reversed on both my 3 minute and 30-tick charts, so I went short at the second downward thrust above. The MACD, however, is a lagging indicator, so I don't consider this a required indicator. It is a great confirming indicator, however, once a change is under way.