Aggressive consolidation underway. Coiling for move to new highs? | RJO Futures

February 8, 2017 3:33PM CST

This week’s comment finds the March sugar futures contract in wait-and-see mode. After a dramatic rally off the lows in January, the March contract has been marking time building a well formed flagging pattern.  Fund traders were forced into new long positions toward the end of January, as the March contract moved above 21.20. According to Reuters COT data, the funds are currently long a healthy but not burdensome 147,000 contracts. 20.40 and 20.04 are levels that, should they not hold, could force the funds to trim their long position. So, upon closer inspection, we see that there is a bit of drama to be found in typically reserved sugar. The trend is up, but within spitting distance of sideways.  Funds have the start of a healthy position. Will they stand pat in the face on weakness? The needs of Asian purchasers should remain the dominant fundamental, but where and when will they ramp up buying?  Will sugar begin to build another leg higher without testing the resolve of traders with a move under 20? The 50 day moving average comes in at 19.82 in the March futures contract and presents a good risk management level for even the longest term traders. The chart and fundamentals both say that sugar is likely headed to test the highs.  But should the tide of fund purchasing ebb due to technical damage or weakness resulting from a well-worn fundamental story, 18.00 could be in play.  

 

Sugar Daily Chart

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