A Commodity Opportunity of a Lifetime: Are You Feeling Lucky?

Soybean oil soars to record highs on March 9. We get to the bottom of why, and where its headed next.

by Nico Isaac
Updated: March 21, 2022

Today, March 17 is known throughout much of the world as St. Patrick's Day, a celebration of the patron saint of Ireland. This holiday, like most of its kind, gives us grownups a much-needed break from the harsh truths of reality. It allows us to shut off our logical, thinking brains and embrace the magic of folklore, Gaelic legends, and all the wild stories that wouldn't otherwise hold water even when dyed green.

Such as:

The patron saint of Ireland was born in... England!

Known for ridding the Emerald Isle of snakes, fossil records show no remains of reptiles due to Ireland's glacial climactic conditions of St. Patrick's time.

And of course, leprechauns. There would be no St. Patrick's Day without the legend of these little green elves who plant pots of gold at the ends of rainbows.

The myths are innocent. They add color and richness for holidaygoers to enjoy.

But what happens when a myth persists that actually causes more harm than good to those who believe in it? I'm thinking specifically of the long-held "legend" of news-driven financial markets.

The mainstream economic lore goes like this: News events, known as fundamentals, drive market price trends. Bad news causes prices to fall; good news begets rallies. And luck be to thee who happens to read about the right event at the right time before said event causes prices to shift.

Take, for example, the recent performance in soybean oil. This often-overlooked commodity made headline news when prices soared to all-time record highs on March 9. And, according to the mainstream experts, bean oil's bullish bounce was caused by the Ukraine war. In short: The Black Sea region account for 3/4's of the world's sunoil exports. Disruptions to this supply chain caused by sanctions has triggered a spike in demand for cheaper, alternative cooking oils like soybean.

It may well be true the Ukraine war has accelerated the pace of bean oil's rally. But what's important to understand, the war did not cause the rally. In fact, the uptrend began last December, months before Russia's propaganda-led invasion of Ukraine ignited on February 24.

As for anticipating the trend before it kicked into gear, our October 2021 Monthly Commodity Junctures takes on the task. There, Chief Market Analyst and Commodity Junctures Service Editor Jeffrey Kennedy presented the near-completion of a contracting triangle.

In Elliott wave terms, this meant bean oil prices were set to become greener than an Irish meadow in spring. From the October 2021 Monthly Commodity Junctures' coverage of bean oil:

"The five-wave move up that began in 2020 is easily discernible on the December contract, where we have beginning in 2020 waves 1, 2, 3, and most likely a contracting triangle fourth wave.

"Sideways price action is indicative of a contracting triangle. Triangles are important because, in this instance here, in a fourth wave, when it finishes, it will give way to a triangle thrust upward."

"We could call for a decline or selling into the first week of November, and that would finish up wave e of the pattern. And then we're looking higher.

"Bottom line: We have compelling Elliott wave reasons to be looking up in bean oil."

And this chart captures the performance that followed: Bean oil continued to move sideways until bottoming in December and giving way to a powerful rally to new highs.

Make no mistake: Not all forecasts work out like this. Elliott wave analysis is not pot of pure gold at the end of a rainbow.

Our model offers an objective strategy for identifying high-confident set-ups and precise price levels to protect exposure along the way.

And, on March 16, Jeffrey Kennedy took to his Daily Commodity Junctures to shine the near-term spotlight on soybean oil. There, Jeffrey assesses the rally since December and reveals whether the uptrend has more fuel in the tank.

See which markets have made the top of Jeffrey's "BE HERE NOW!" watch list today!