Bottom of 7 Month Range. Bounce Required?

December 13, 2017 3:19PM CST

This week’s comment finds the March sugar futures contract trading near steady after six straight sessions lower.  Sugar has dropped from 15.49 to 13.70 in one week but open interest is increasing.  The fundamental story, more supply/surplus, has come into focus again across the wires. Interestingly, soft commodities such as cocoa and coffee have seen a downdraft to new lows or near new lows. This could be year-end position squaring by large participants or just the realization that there is ample supplies of these soft commodities.  Either way, the reality we see on the chart shows the March sugar contract is now squarely in oversold technical territory.  A bounce to 14.50, the 50-day moving average comes in near 14.57, is certainly in the cards. Sugar has found support in the 13.50-13.70 area four times in 2017.  There are projections for surplus in 2018 and more balanced supply/demand in 2019 but sugar remains mired in a range between 13.50 and 15.50. Trend followers have been on the losing side of this lateral chop in sugar while traders willing to take counter trend positions at the top and bottom of the range likely have been rewarded. Look for sugar to bounce back to at least the middle of the range.  Aggressive traders could use February calls to position for a move back to the middle of the range at least. The Feb options do not expire until the middle of January and give traders four weeks to position for another whipsaw.

Sugar March ’18 Daily Chart

Sugar_Mar18_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.