Sugar chart looks heavy, downside breakout looms?

October 18, 2017 3:22PM CDT

This week’s comment finds March sugar futures about right where we left them in our last comment. Early in the week, March sugar traded to and failed at the 50-day moving average. Failure to trade and hold above key moving averages is a hallmark of bearish markets. The other side of the coin in the sugar market has been an inability of the March contract to make new lows. For the last 30 days, March sugar has been well supported, unable to break down to any new lower ground while fundamental news flow has leaned largely bearish. Commitment of Traders watchers have pointed out the short position of the funds repeatedly, as have I in this space. But that alone does not appear to be enough to take sugar futures to higher prices. The chart below shows that March sugar has failed to breakout meaningfully in either direction. Classic technical analysis tells us that markets that consolidate in this way typically, ultimately, continue on in the direction they were traveling before the consolidation. To this end, price action below 13.82 should see the funds adding to their already sizable, near 100k contract, short position. Over the last three months, March sugar has whipsawed traders from week to week and made for difficult directional trading. Because of this traders have to stay nimble. But, should we see a breakdown below recent lows of 13.83 and 13.72, then at least a test of 13.50 is in play. Likely much lower. 


Mar '18 Sugar Daily Chart

Mar '18 Sugar Daily Chart

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

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.