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Soybeans and Corn: The Big Splash
How do you know at what price level you should place a protective stop?

By Vadim Pokhlebkin
Mon, 31 Mar 2008 18:00:00 ET
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Two markets made a big splash in commodities news today (March 31): Soybeans and Corn.
 
"Soybeans, reported Bloomberg, "fell the maximum allowed by the Chicago Board of Trade after the U.S. government said farmers will boost planting by 18 percent, more than analysts forecast."
 
Corn, on the other hand, "soared to a record after the U.S. government reported farmers will reduce acreage more than analysts forecast to make room for soybeans."
 
Sounds like a good time to sell Soybeans and buy Corn, right? Maybe – but what if Soybeans have already exhausted the downside potential with Monday's plunge? And what if Corn is ready for a break after reaching a new high?
 
In other words, what if you're wrong? And more importantly, if you are wrong, where do you get out of a losing trade?
 
Fundamental analysis is not equipped to answer this question. News reports have their place, but when it comes to finding a price point to place your stop loss, news is of little value.
 
Enter the Elliott Wave Principle. As our own Daily Futures Junctures editor Jeffrey Kennedy points out in tonight's (March 31) issue, "One of the three cardinal rules of the Wave Principle is that wave two may never retrace more than 100% of wave one." Here's how this rule is represented graphically:

By applying this rule in your trading, you can always determine the exact price point at which your wave count is wrong – and thus the point of stop loss. 
 
Jeffrey did just that in his Friday's Weekly Wrap-Up when he identified the 1207 price level in Soybeans as key. Now that it was breached in Monday's trading, "wave two retraced more than 100% of wave one, thereby negating the labeling I posted in Friday's Weekly Wrap-Up."
 
Does this mean that Soybeans will keep falling like a rock? Not so fast. Read Jeffrey Kennedy's complete analysis online now (risk-free) and learn his surprising conclusion. You also get his latest thoughts on Corn – and you may find those equally surprising.
 
The March 31 Daily Futures Junctures is online right now, yours risk-free for 30 days; just scroll below for details on how to get it.

Tags: Commodities, soybeans, Corn, Chicago Board of Trade

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