Soybeans and Butterflies

Top chart is the 4 hour November Soybean Futures chart. The next chart is the 1 hour chart.

On the 4 hour chart you can see price came down and bounced off the 61.8% Fibonacci retracement level of the yellow range. You can also see, at the same time, it was bouncing off a level between the 127.2% and 161.8% Fibonacci extensions of the purple range.

Using the 1 hour chart, you can see a valid Butterfly pattern, where XA is the purple Fib range. The D1 point was an assumed D point for a Gartley, and we did get a good bounce up to 1359, but that fell short of any targets. Then price dropped back down below the X point and led to a Butterfly pattern.

Today we took a sudden drop at 10am ET, but we bottomed out above the D2 point, thus forming a higher low with a tweezer bottom. Then we found some resistance from the 34ema but we closed above the 8ema. Stochastics are not yet overbought. Also, the recovery from the 10am drop formed a Bullish Engulfing candlestick pattern.

I had entered long at 1317 1/4 yesterday using the YK mini-contract ($10/pt) but didn't feel confident enough to post it. With today's price action, I'm feeling more confident.

I don't like that we're between the 8ema and 34ema. It suggests we may bobble between them for a while. Also don't like the Bollinger Bands are inside the Keltner Channel. Although, this sets up a possible BB/KC breakout, which could be very constructive in the near future if we break out to the upside.

Summary:

Entry: 1317 1/4

Stop: 1308 (just below the D2 point)

Target: 1357 (just below the .618AD level)

Risk: 1317 1/4 - 1308 = 9.25 * $10/pt = $92.50

Reward: 1357 - 1317 1/4 = 39.75 * $10/pt = $397.50

R:R = 397.50/92.50 = 4.3:1 which is scary good.