Scalpers Can Trail Risk on Sugar Sale to $0.2100

January 31, 2017 2:10AM CST

The past week's eroding price action after a retest of 19-Jan's 21.38 high is consistent with our peak/reversal count introduced in 19-Jan's Trading Strategies Blog that recommended a short position on a recovery attempt to 20.75 OB.  As a result of this latest spate of erosion scalpers with very tight risk profiles can objectively trail protective buy-stops to 21.00 , or just above 24-Jan's 20.99 reactive/corrective high.

Sugar 240 Chart

This peak/reversal threat remains predicated on the following facts:

  • a confirmed bearish divergence in daily momentum below 10-Jan's 20.15 corrective low that breaks the uptrend from 15-Dec's 17.84 low
  • a textbook 5-wave Elliott sequence up from 17.84 as labeled in the 240-min chart above and
  • perhaps most importantly, a historically frothy 97% bullish sentiment level in our RJO Bullish Sentiment Index.

Sugar Daily Chart

Indeed, the stubbornly frothy 97% reading in our proprietary RJO Bullish Sentiment Index shown in the weekly log scale chart below reflects a whopping 171K Managed Money long positions reportable to the CFTC versus only 6K shorts.  Such a lopsided skew to the bull side doesn't mean much as long as a major uptrend remains intact.  The moment that trend is threatened or compromised with a confirmed bearish divergence in momentum, the risk to this extent of bullish exposure becomes a source of fuel for downside vulnerability and potentially steep losses as the market forces the capitulation of this exposure.

These issues considered, a bearish policy and exposure from 20.75 OB remains advised with strength above at least 21.00 and preferably 21.38 required to threaten or negate this call.  In lieu of such strength we anticipate a break of 19-Jan's 20.05 initial counter-trend low ahead of further and possibly steep losses to the lower-19-handle or below.

Sugar Weekly Chart

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