On 3/1/16 I wrote this article suggesting the possibility of a buying opportunity in soybeans. Hey, guess what, if you write enough of these types of articles, every once in awhile you get one right! Figure 1 displays the action for May soybeans since the initial article.Figure 1 – May Soybeans bounce off a of multiple bottom (Courtesy: www.Barchart.com)
(See also An Update on Crude Oil Volatility Play)
So in theory had a trader bought May soybean futures at 861 with a stop-loss at 852.5, the initial risk (barring a gap as detailed in the original article) would have been -$425.
Since that time May beans have rallied from 861 to 888. At $50 a point that equates to an open profit of +$1,350. The obvious question of course is “What Now?”
As always, there are various possibilities:
As you can see in Figure 2 there is some meaningful resistance between 890 and 891. If price stalls there I would consider taking some profits.
If holding a 1-lot: I would probably take the money and run if price hits 890 and fails to break through to the upside.
If holding more than a 1-lot: I would probably sell half of my position if price hits 890 and fails to break through to the upside. For the other half, I would consider a trailing stop (initially just below 875). This approach allows a trader to:
A) Take a decent profit (roughly $1,400 per contract) on half of his or her position
B) Lock in a profit on the remaining position (roughly $675 per contract if the position is sold at 874.5 trailing stop)
C) Hold on to half of the position just in case soybeans breakout above 890 and keep going.Figure 2 – May Soybeans position management price points (Courtesy: www.Barchart.com)
Boy, this “picking a bottom” thing sure is fun, er, well, when it works.