Conclusion, Investment Implications, Strategy
The Teucrium Soybeans ETF (SOYB) is in the midst of emerging new Strategic (quarterly) trends of outright strength and relative outperformance versus the S&P 500. We view this as a potential opportunity to participate in market expectations for increasing inflationary pressures as the Federal Reserve backs away from its previous policy of aggressive stimulus — which in our view drove the 2021 US stock market advance. A sustained rise above the 22.46 area in SOYB would target an additional 11% rise to 26.00. This is an Asbury Momentum trade idea.
Analysis and Rationale
The Teucrium Soybean (SOYB) seeks to have the daily changes in the Shares’ NAV reflect the daily changes of the price of soybeans for future delivery, as measured by the Teucrium Soybean Index. The fund seeks to achieve its investment objective by investing under normal market conditions in Benchmark Component Futures Contracts. Under normal market conditions, the manager expects that 100% of the funds’ assets will be invested in Benchmark Component Futures Contracts and in cash and cash equivalents.
The green highlights in the upper panel of Chart 1 below point out that SOYB rose and has remained above its 200-day moving average as of Dec 20th, indicating an emerging major bullish trend change. The green highlights in the lower panel of Chart 1 below point out that the blue daily relative performance line of SOYB versus the SPDR S&P 500 ETF (SPY) rose above its 63-day (quarterly, our Strategic time period) moving average on Dec 20th, indicating an emerging trend of Strategic relative outperformance versus the US stock market, and is now retesting it as underlying support.
This sets up a relatively low risk and potentially high reward opportunity to buy SOYB with a protective stop below these new outright and relative performance trends.
Table 1 below shows that, considering a 26.00 upside target and a protective stop placed below the 22.69 area, a long entry price of 23.48 would provide a 1:3.2 risk/reward ratio (risking $1.00 to make $3.20) with an initial risk of 3.4%.
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Please consult the table showing our Asbury 6 key market metrics to help determine if this investment is suitable for you.