An example of morphology plays itself out in Soybeans

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Soybeans flashed a significant sell signal today. This sell signal is an excellent example of chart morphology.

I define morphology as an evolution of chart construction that eventually declares its hand.

  1. The decline on Jul 20 completed an 11-week H&S top in Nov Soybeans, thus establishing a target of 892
  2. Following a 2-week decline, the chart formed a 4-week H&S bottom pattern (red box)
  3. The subsequent weak rally served as only a retest of the larger overhead H&S top. Notice on the second chart below the quite symmetrical “M” top on the intraday graph during this retesting process.
  4. The wide-bodied candlestick bar (WBB) breakdown today confirms the validity of the retest, qualifies as a Wyckoff Sign of Weakness (SOW) and completely negates the small 4-week H&S bottom

This chart is a wonderful example of how the construction of a graph morphs over time to an eventual resolution. Based on this chart I would expect the market to trend in a sustained manner to its target. Should this not occur it would mean that further morphing is ahead.

 

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I continue to note that the Soybean Oil weekly graph could be tracing out a wonderful H&S bottom pattern. If this interpretation is correct, the right shoulder is under construction. I will monitor this graph for a buying opportunity. Support should exist in the 31.20 to 32.50 zone, although a retest of the existing right shoulder low at 29.80 cannot be ruled out.

 

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plb
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