Upside fakeout in sugar, but downside isn’t a lock just yet

September 20, 2017 3:26PM CDT

This week’s comment finds October sugar futures homing in on traders who are long, short, and anything in between. Not even the sidelines seems to be a safe place to hide. Three trading sessions ago sugar was offering long term traders the chance to jump aboard the next big upside breakout. With October trading above 14.50, traders were forced to enter new long positions and exit any remaining shorts. As of September 12, over a week ago, noncommercial funds were short about 95k contracts. It is likely that much of that position was covered going into Friday, September 15. However, the last three trading sessions have seen the October contract come from 14.58 down to 13.72. The result of this move was significant technical damage to the chart and to the psyche of traders who had just entered long positions on Friday. Fundamental news flow from the wires has again turned bearish with word of a large trade house delivery. Hightower group also highlighted that “curbs on production and exports, which have been in place since 2006 (in Europe), are set to expire on September 30.” I am not sure that is as bearish as it sounds. Where has the sugar been going since 2006? But, any increase in production in a time of surplus has to be reckoned with. Today’s price action, which put sugar back above 14.02, leaves recent bulls with more than a glimmer of hope. If the October contract can see a number of closes above 14.00, the funds may be emboldened to attempt to protect the position and try to paint the chart. Failure to stay above 14.00 should leave new arrivals to long side under pressure, and likely to head for the exits. 13.40 and 12.90 are levels that should they be breached will result in an increase to the size of the fund short position and possibly a move to 12.00 or lower.


Oct '17 Sugar Daily Chart

Oct '17 Sugar Daily Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.