Showing posts with label CBOT. Show all posts
Showing posts with label CBOT. Show all posts

Friday, 1 January 2016

In Soybean: Don’t follow World Market when You Trade in India

During last few years, Indian oilseeds trading community has seen high volatility in prices while the world market trend remained more or less steady in one direction. Those who believe that it is the CBOT that dictate the market sentiments in many commodities went wrong in case of soybean when it comes to trade in India.


On the one hand where since last four years, the soybean Prices at Chicago Board of trade (CBOT) have seen continuous fall to the extent of 40% till this December, Indian soybean market has gained around 14%.



Figure 1 shows the change in production and prices in the Indian and world market. Since 2011-12 to 2014-15, the soybean production fell by around 14% in India resulting into continuous prices rise to the extent of around 14% during same period.

On the other hand the soybean production at world level has seen significant jump of around 33% during last 4 years resulting in to 40%  fall in its price.

Thus we have seen a complete divergence in the production and price behaviour of soybean in  India from the world market.

We try to identify and explain why Indian soybean prices remained immune to the world market sentiments. Let us have a look at Table 1.



Some Observations from Table 1:

  1. The soybean production keeps on falling for the straight 4th year. A production fall of 14% is seen in the last 4 years.This year (2015-16) too the production is likely to go down significantly. 
  2. Due to fall in the production, domestic soybean oil production has also come down by around 19%.
  3. Soybean meal exports to the various countries have fallen dramatically by around 83% in the previous 4 years. Year 2014-15 has proved to be a nightmare for the oilmeal export industry.
  4. Soybean oil imports to the India have increased by 173% during same period.
  5. World soybean production continued uptrend resulting into steady and consistent price fall in the world market. During last four years, the world soybean production rose by 33% while soybean prices fell by around 40%.

Thus, it is clear from the above facts, that despite bearish world market sentiments, Indian soybean market remained firm and in future too, overall sentiments are likely to remain positive with some intermittent fall owing to various other reasons excluding demand and supply.

In the Year 2015-16, the Indian soybean Industry experts feel that production may further decline and may remain near 87 lakh tons as against 91.7 lakh tons seen during 2014-15. Thus continuous shortfall in the production amidst increased domestic demand of soyoil and soymeal with continue to provide support to the soybean prices in India in medium term.

India impose very high import duty on oilseeds and oilcake (oilmeal) import into India to safeguard its own domestic industry. Currently the effective import duty on oilseeds and oilcake is 36.55 and 20.80% respectively in India.

Soybean is a rainfed crop grown in the Kharif season in India. Thus production fluctuates widely due to change in monsoon rainfall quantum and it's spatio-temporal distribution. Further the growing domestic demand by various industries like animal feed and FMCG companies keeps on supporting the prices of soybean in India.

Due to high domestic prices, the soybean processing Industry in India is passing through very tough time due to high disparity owing to high raw material cost. The Indian Industry has started loosing its export markets resulting into drastic decline in to soymeal export figures. The capacity utilization is at the lowest and many plants are close down or operating at very low capacity due to disparity in crushing and export.

The Solvent Extractors’ Association of India, in its press releases cites following main reasons of drastic fall in the soybean meal by India.  

1. High price of soybean in domestic market v/s lower realization for meal and oil resulted into drastic fall in crushing and export of soybean meal.
2. The export to Japan, Iran, Thailand, Indonesia, Taiwan and Vietnam drastically reduced due to disparity in export in these regions against severe competition from other origins including China and Argentina.
3. India lost Vietnam market for soybean meal due to stiff competition from other origins and increased availability from domestic crushing of imported soybean.
4. On wake of lifting sanctions, Iran shifted soybean meal buying from India to another origins. Currently India is out priced by US$ 100 against other origins in Iranian market.
5. Japan was big importer of Indian soybean meal being non GMO, however now started using GM soybean meal and buying from other origins.


On the edible oil import front, India’s import is increasing day by day as globally the prices of edible oil are historically low since 2008, and had affected the domestic players. The domestic oilseeds prices are high and the imports are quite cheap due to less import duty on the edible oils.


Lessons:

  1. Very low domestic production leads to excessively higher prices in soybean; no matter world market is falling.
  2. Domestic demand will grow day by day. Thus, till we don’t increase production or start importing soybean, the domestic prices are hard to come down significantly in long to medium term.
  3. Soybean meal export and domestic edible oil manufacturing industry may come into severe crisis if steps are not taken to improve domestic supply of soybean in a planned way.
  4. Soon, India may become net importer of soybean as well as soymeal and other meals if oilseeds production problems are not addressed adequately.
  5. Soybean prices are still rising in India, despite the fact that world markets are having ample supplies. Just imagine what will happen if some point of time world’s soybean production decline in any year. Prices will shoot like anything.

Thus, while trading in Indian soybean market, just have a look at it's own fundamental factors rather than blindly following world market sentiments otherwise possibility of going wrong is very high because INDIA DOES NOT FOLLOW WORLD WHEN IT COMES TO TRADE SOYBEAN.

Friday, 27 March 2015

Soy oil trades down in Indian Market

11.00 PM IST
Soy oil Update

Soy oil trades down by more than 1% in Indian futures market due to subdued demand in the physical market. Weakness is also seen in the international market as soy oil prices at CBOT also trades down by 2%.

Yesterday when NCDEX Soy oil April Contract was trading at 588.50 level, we posted that market may fall from current levels.

Today till now market has made a low of 579.45. Thus we have seen a fall of Rs. 9. Currently market trades at 580 level.

Again if market close below 584-585 level, then next week also we may witness further fall... may be near 560 level.

NCDEX Soy Oil April Contract



Monday, 9 March 2015

Downtrend intensify in Oilseeds and Edible Oils Markets in India

Today is the first trading day of the current week starting 9 March and Indian oilseeds and edible oil (Soy oil and Crude Palm Oil) trades down both in physical as well as futures market.

On last friday on 6 March in my previous post, I predicted that edible oil market in India may witness steep fall in near future.

Today market has given early signs of it. Soy oil and Palm oil tried to go up but due to lack of physical market support, the market has started coming down.

In the physical market, the soy oil price are down by Rs. 5.60/10 kg in the Indore market which is the benchmark market for soy oil and soybean.

In Indian futures Market, the soybean, mustard seed, cpo and soy oil all are down in the range of .20 to .88% from previous close.

Discouraging oilmeal export data, poor domestic edible oil demand, weak international market sentiments do not allow Indian market to move up.

It seems that more weakness will be seen in near future.

More update will be given in the night near market close. (IST)

Tuesday, 3 March 2015

Be Ready for Sharp Movement in Soy oil in Indian Market in near future

With no change in the duty structure in the Union Budget  on edible oils, market will now start following fresh demand and supply fundamentals in Indian market.

International crude oil prices have also shown some improvement in short term.

In India, the central and northern parts which are the major oilseeds producing states, have received widespread rains which may delay the Rabi oilseeds crop arrivals a little bit delay particularly the Mustard seed crop.

With the start of summer season, demand is likely to pick up gradually.

Please note that for the past 7-8 days soy oil market moves in range of 10-12 rupees with no clear direction.

Right now Soy oil April Contract at NCDEX trades at   593.75.

As discussed earlier, there are signs of some improvement in the physical market demand. But there is still some skepticism over long term outlook in the light of amply world edible oil supplies.

This is the very reason why speculators are a little bit quite and waiting for some clear trend to emerge to make their fresh bet.

The chart pattern suggest that in the next couple of days some clarity must come in the market about the medium term.

The downside seems limited from current levels.

On Daily Chart of Soy oil April Contract at NCDEX following technical levels seems valid for next couple of days.

Support = 585  Resistance 1 = 596  Resistance 2 =604.
A closing above 597 will lead the market towards 604.


Friday, 20 February 2015

Soy oil remains volatile ahead of the Union Budget in Indian Market

Weak global cues of soy oil and crude oil keeps Indian market sentiments subdued in physical as well as futures markets.

Physical markets traders however opine that sooner or later prices are bound to improve with the start of summer in north India after Holi Festival.

They seems downside limited in India market.

Union Budget in India is also scheduled next week on 28th Feb.

Oilseeds industry in India is in favor of gradual increase in the import duty on the refined edible oil. This is to be seen what happens in Budget.

Thus market will remain more speculative and will  follow less demand and supply fundamentals. 

A cautious trade is advised amidst high volatility.

NCDEX Soy oil April Contract

Monday, 16 February 2015

Indian Soy oil Futures Market trades 1% up tonigt

As mentioned in the last post, the Indian soy oil futures opened with a positive note in the morning on renewed buying interest in the physical as well as futures market.

Right now  NCDEX Soy oil April Contract trades at 611 level (1% up from previous close).

Overall trend is likely to remain positive today.

Saturday, 14 February 2015

India: Soy oil closes up by 1.87% during week ending 14 Feb 2015

Finally Indian soy oil market closed in green amidst improved volumes and positive global cues in soy oil and crude oil.

NCDEX Soy oil April Contract

Weekly Levels: ( 9-14 Feb 2015)
Open = 599.40
Low = 585.10
High = 605.90
Close = 605.90
% weekly change between Open and Close = (605.90-599.40)/599.40 = 1.08%

Thus on weekly basis a gain of 1% was seen in the Indian soy oil futures market.

Technically a BUY signal is almost confirmed by the moving averages. 5 day and 10 day Exponential Moving Averages (EMA) have changed direction towards upside and today's price has given closing well above the 5 and 10 days EMA. The 5 day EMA has crossed from below to 10 days EMA making a golden cross.

Thus, it seems that next week starting from 16th Feb, the market should trade positive. 
On daily basis chart, the SUPPORT AND RESISTANCE ARE GIVEN BELOW


S1 =595    S2= 587    R1 = 612   R2 = 615





Thursday, 12 February 2015

CBOT Soy oil looks weak, Indian market continues to remain bearish

1.26 PM [INDIAN STANDARD TIME]

In the light of the subdued demand, the soy oil market condition still looks weak.


CBOT: Soy Oil March Contract

Current Level : 31.53
If it starts closing below 31.50 level, the more correction might be seen. The next good support seems at 630.15 level.

If it is able to close above 32 level, then fresh strength might be seen.

However, possibility of downside movement is more.


NCDEX: Soy Oil April Contract
Market seems weak.

Current Price: 589.95
Support:  584

Resistance: 594

Tuesday, 10 February 2015

Sharp Correction expected in soy oil in short term in India

Update: 10.06 PM IST

As described in the previous post, the price fall has deepened in the Indian soy oil market. The fresh weakness in the international crude oil and soy oil prices at Chicago board of Trade (CBOT) has further discouraged the bulls.

The way prices are falling, it seems that very sharp correction is waiting shortly.

---

For more details please see the below mentioned posts on soy oil and WORLD VEGETABLE OILS FUNDAMENTALS FOR 2014-15.


Soy Complex Market Fell in India for the third consecutive day

Indian Soy oil market shows weakness on lacklustre physical market demand. The spot market prices have fallen.

As we stated in our earlier post that soy oil was getting resistance on higher level and buyers were reluctant to make fresh buy at higher levels.

If we look at the global vegetable oils supplies, we find that fundamentals are in favor of bears. (Please check the earlier post : 9 Feb 2015: WORLD VEGETABLE OILS FUNDAMENTALS FOR 2014-15)....

The current market situation suggest that market is unlikely to witness any major upside in near future.

Currently the NCDEX Soy oil Feb contract trades at 613.15 (-1.26%) at 4.39 IST.


Saturday, 7 February 2015

Soy Oil Prices Consolidates during Week ending 6th Feb 2015 in Indian Market

Bull and Bears remained equally active during first week of February 2015. The week started with a bullish undertone, but after the initial gains for first two days, prices hovered in a narrow range thereafter for most of the time throughout the week and finally closed in Red. However, on weekly basis marginal gains were seen during this week.

NCDEX Soy oil Feb Contract
Weekly Open = 618
Weekly High = 634.95
Weekly Low = 618
Weekly Close = 627.50
Difference between Open & Close = 9.5
%age weekly gains =( 9.5/618) *100 = 1.53%

This indicates that market is getting resistance on current levels and it needs some big news to push market up from current levels.
These gains were mainly seen due to sharp rise in international crude oil prices, and improvement in the CPO prices at BMD, Malaysia.

The next week may prove deciding in finding the direction of the market for medium term.

In India summer season is just starting from March onwards and demand of crude palm oil increases as compared to soy oil.


NCDEX Soy Oil Feb Contract as on 6 Feb 2015



Thursday, 5 February 2015

Soy oil market sentiments improve in Indian Market

Today Soy oil market in India traded with a bullish undertone despite the fact that yesterday sharp correction was seen.

In fact, strong international market sentiments i.e soy oil at CBOT and Crude palm oil at BMD, Malaysia added to the bullish undertone of the Indian market.
Firm international crude oil sentiments also supported the market. Despite all these positive factors market was unable to break yesterday’s high price indicating that traders are still in dilemma regarding future movement of the market.
It may take some more time to witness the clear direction of the market. Let us wait for a day or two.


Today NCDEX Soy oil Feb contract closed at 631.30 (1.25 % up from previous close).

Wednesday, 4 February 2015

Soy oil Market update of Indian Futures Market


As described in the earlier posts, the soy oil market seems unable to sustain on higher levels. After witnessing a price rise for the three consecutive days, today market fell due to lacklustre demand in the physical market.

The earlier rise was mainly due to short covering and support from crude oil. Today crude oil has also seen some profit booking in international market.

In Indian futures market, the NCDEX feb soy oil contract is getting strong resistance near 632 level. Today if market closes below 626 level then market may further witness weakness towards 610 level. [current price level at 9.19 IST is 624.45]

At the same time closing above 632 will make market strong.

Current market condition seems weak.

Soy oil Weekly chart : NCDEX Feb contract

Learn to earn in Long Term Trade in Commodities through Technical Analysis

Commodities Market trading is a little bit difficult as it needs reasonable knowledge of the fundamental factors of demand and supply of the commodity under trade as well as some basic knowledge of the Technical Analysis to decide the entry and exit point.

There are numerous articles and study material freely available about Fundamental and Technical Analysis.

However here we will discuss about some basic concepts of technical analysis which we have found very useful and simple.

We will learn how  to use indicators to make a "DECISION MATRIX TO IDENTIFY A RIGHT TRADE" from a Long Term Trading Perspective. 



Before we start, few points must be noted down.
  1. All known information is reflected in the price.
  2. Market moves on the basis of expectations and emotions of the Traders i.e (Buyers and sellers). 
  3. No Single Technical indicator is right all the time.
  4. You too don't have to be right all the time.
  5. Practice to learn about few reliable indicators and stick to them.
  6. Be consistent and disciplined in your approach. 
  7. Most of the money is being made in a TREND, especially as far as futures market is concerned.
  8. Patience and discipline is needed as you must wait for clear trend in the market in order to succeed on the long run.
  9. As long as the indicators are in neutral territory avoid to trade unless you are a very knowledgeable trader.

Terms used in Technical analysis
What is Technical Analysis
  • In simplest words, it is the examination of past price movement to forecast future price movement.
  • In Technical analysis, price refers to any combination of open, high, low and close for a given commodity over a specific time frame.
  • The time frame can be intraday, daily, weekly or monthly or yearly etc.


Important Types of Technical Charts

Line charts, Bar charts, Japanese Candlesticks chart

Candlesticks Chart Pattern







Bar Chart Pattern










Market Trend
Up trend, Down trend, Sideways trend

Moving Averages (MA)
ØThese are some of the oldest and most useful indicators.
ØBasically moving averages show TREND.
ØA BUY signal is given when price crosses above the moving average and the MA is directed upward.
ØA SELL signal is given when price drop below the MA and MA is directed downward.
ØBuy or Sell signal is not given when MA changes direction but price does not cross above or below the MA.
ØTHE MOVING AVERAGES SERVES AS SUPPORT AND RESISTANCE.

Types of Moving Averages
ØSimple Moving Average (SMA)
ØExponential Moving Average (EMA)
ØWeighted Moving Average (WMA)
Typically 5 and 10 are used in EMA in most of the agricultural commodities.


Bollinger Bands (BB)
Bollinger Bands are a kind of trading envelope. They are lines plotted at an interval around a moving average.

Period: The period for which to compute the band.(Typically 10 is used in agricultural commodities)

Band Width: The half-width of the band in terms multiples of standard deviation. Typically 2 is used.

Bollinger Bands consist of a moving average and two standard deviations charted as one line above and one line below the moving average. 

USES:
ØTo determine overbought and oversold zones.
ØTo confirm divergences between prices and indicators.
ØTo project price targets.
ØThe wider the bands are, the greater the volatility is.
ØThe narrower the bands are, the lesser the volatility is. 

Volume
ØVolume can be a barometer of future activity and direction.
ØVolume measures the number of contracts that exchanged hands during the trading session.
ØIt measures market activity and liquidity. Higher volumes means higher liquid contract or commodity and vice-versa.
ØVolume is tracked on an individual delivery month and total symbol basis. 

Open Interest (OI)
ØOpen Interest is applicable for futures and commodities charts only.
ØOpen interest shows the total number of futures contracts that have been entered into and not yet liquidated by an offsetting transaction or fulfilled by delivery.
ØWhen both sides are new, open interest increase.
ØWhen only one side is new, open interest remains unchanged.
ØWhen both sides close out, open interest decreases. 

Relative Strength Index (RSI)  ------- (Range : 70-30)
ØIt measures market's strength and weakness.
ØA high RSI, above 70, suggests an overbought or weakening bull market. A low RSI, below 30, implies an oversold market or dying bear market.
ØIt works best when a failure swing occurs between the RSI and market prices. For example, the market makes new highs after a bull market setback, but the RSI fails to exceed its previous highs.
ØWhen price touches the upper BOLLINGER BAND, and RSI is below 70, it is an indicator that trend will continue.
ØWhen Price touches the lower BOLLINGER BAND, and RSI is above 30, down trend will continue.
ØIf a price touches the upper BOLLINGER BAND and RSI is above 70, the trend may reverse and decline.
ØIf a price touches the lower BOLLINGER BAND and RSI is below 30, the trend may reverse and move upward.

Stochastic  (Slow) - (Range : 80-20)
ØIt indicates OVERSOLD & OVERBOUTH market conditions.
ØIn an upward trending market, prices tend to close near their high.
ØIn a downward trending market, prices tend to close near their low.
ØWhen an upward trend matures, prices tend to close further away from their high.
ØWhen a downward trend matures, price tend to close away from their low.
Clusters
ØThe stochastic indicator attempts to determine when price starts to cluster around their low of the day in an up trending market, and cluster around their high in a downtrend. 

Moving Average Convergence/Divergence (MACD)
ØBuy when the oscillator crosses above the slower exponential moving average of the oscillator.
ØConversely, you sell when the oscillator crosses from above to below the exponential moving average of the oscillator.
ØLastly, divergence is possible with the MACD.
ØThe ideal signal would show divergence, clearly break a dominant trend line, and display the crossing of the MACD lines.



How to use the above technical Indicators ---- Learn 









Thus, Exponential Moving Average (EMA), Bollinger Bands (BB), Relative Strength Index, Slow Stochastic and MACD are five major technical tools which we can apply in finding initiation point and exit points. Most of the time you will have a winning trade in long term.