05/27/2014 11:15am CDT
This week's commentary finds an entirely different picture on the July sugar futures chart following our update in the last eView. On what was the highest volume in weeks, from May 12 to May 14 the July sugar futures rallied from 17.13 up to 18.28, consolidated and promptly fell right back into the zone from which it broke out. Today's price action shows July sugar futures dropping out of the bottom of that zone taking out support at 17.07 and 17.05, previous lows on the chart, again on big volume. Like every other technical tea leaf reader I get very interested in the "news" surrounding big moves. This is especially true when the big move makes me more 'not currently correct' than I already was. Wire services did a great job fitting news to the move. Concern over the El Nino weather pattern unfolding and the need for risk premium as well as possible supply reduction from Brazil are fine fundamentals. Since then though the market has fallen back into the 17.00 to 18.00 area where it has been chopping for the last month and with today's price action has broken out to the downside. According to the Hightower group in this morning's commentary, funds have been buyers on the way down over the last week. The move today places all long trades entered since May 12 squarely underwater. Adding to the downside pressure, trend followers have begun to be stopped out of long positions with some entering new short positions as well. It remains to be seen if the funds will be able to protect the 17 level with stepped up scale down buying or if today's move is the beginning of a round of capitulation by the speculative category that will drive this market to 16.00. The chart does point to a few clear facts: The 18 level has been soundly rejected. New longs are under significant duress. The next level of support is 16.80, a neckline from the reverse head and shoulders pattern seen on the chart from earlier in the year. In my opinion, if the July sugar futures can't find support in the area of 16.80 to 17.00 this market could trade to 16.00 or lower in short order.
If you'd like to learn more about futures trading or the sugar market specifically, please contact Joe Nikruto at 800-453-4494 or firstname.lastname@example.org.
Jul '14 Sugar Daily Chart
Source: RJO Vantage