Stochastics say slow, but chart looks ready to launch

January 18, 2017 9:00AM CST

This week’s commentary on sugar futures finds the March contract marking time, working off of a technically overbought condition after the recent run up.  That run up, from a low of 17.84 to a recent high of 21.16, leaves the March contract trapped squarely within the bounds of the 38.2% and 50% re-tracement levels from the sell-off that began last September.  That sell-off took the market from 24.00 down to 18.00 in a little more than 3 months.  Recently revised deficit numbers from a few large bank/trading concerns may have caught the market off guard, and added to the buy side pressure brought about by large players who use sugar as a hedge against inflation or long term investable commodity.  Also interesting to note, sugar held up well during index fund re-balancing that saw positions in futures contracts for the sweetener trimmed.  The fundamental situation remains bullish with deficits projected again for 2017. But a healthy bull market needs to be fed more than once a month.  The chart shows a market that is consolidating and appears to be gathering steam for a move toward 22.00 and maybe beyond. It could be that waiting for a new fundamental development will leave traders at the station watching the train make its way down the track.  March options or options spreads give traders the chance to hold positions until the middle of February.

Sugar Daily

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