Softs

Sugar chart looks heavy, downside breakout looms?

Posted 10/18/2017 3:22PM CTJoe Nikruto

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

Joe Nikruto

Joe Nikruto attended Indiana State University and DePaul University in Chicago with a major concentration in economics. "It was during college that I got a job as a runner at the Chicago Board of Trade. I was immediately hooked," he says.He adds that he also enjoys futures trading because anyone can do it. "Your success depends on how you handle the risk and how much work you are willing to put in. You don't need a big-time Wall Street connection, or a degree from an Ivy League school to get started. Your success largely depends on you and what you put into it." In 1992, he started as a runner and back office clerk for a very large futures commission merchant (FCM). He moved up to pit clerk, then research associate working on the trading floors directly for a grain and livestock concern based in Memphis. He spent time on various trading desks for a large retail FCM and then became Series 3 registered in 1997. He also helped develop an online trading platform and consulted on development and trading of mechanical trading systems. He has always worked to assist his clients with all types of trading-from option strategies and hedging to complicated mechanical trading systems. His advisory background includes Floyd Upperman, McMaster, Walter Bressert, Ken Roberts, Tech Guru, Hightower, Helms and Barry Rosen. As for his involvement with RJO, Nikruto says, "R.J. O'Brien has been in operation for more than 100 years. That is a century of supporting customers. You have to be doing something right for folks who use futures to choose to do business with you for that long."