Today, I'm sitting down with EWI's Futures Junctures editor Jeffrey Kennedy to discuss an interesting Elliott wave pattern unfolding in Soybean Oil futures.
Bart: Jeff, what is it about the soybean oil market that has caught your eye?
Jeff: From early October, soybean oil has been tracing out what appears to be a contracting triangle.
Bart: Can you tell us a little more about this Elliott wave pattern?
Jeff: Sure, a contracting triangle is an overlapping 3-3-3-3-3 corrective wave pattern, meaning they can only be found in 4th, B or X waves.
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Bart: So, what's so special about triangles?
Jeff: They can be a very exciting pattern because the move following the completion of a triangle is generally swift. Sometimes the proceeding move travels the distance of the widest part of the triangle. We call it a "post-triangle thrust."
Bart: I know that you often like to use additional technical indicators as support to your Elliott wave forecast. Are there any other technical approaches that "pop out" to make you believe your forecast for soybean oil is on the right track?
Jeff: Glad you asked. If you look at the following candlestick chart, you'll notice what I call "market compression." This is where the Bollinger bands contract and close in on each other. When a market compression environment ends, you tend to have market expansion. This "compression environment" is exactly what we're seeing in soybean oil, and it supports the idea that a swift move is just around the corner.
Bart: Thank you for your time Jeff.
Jeff: No problem, I'll be keeping a close eye on this market to see if price action does in deed confirm this pattern.
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