Is there a tradable bounce in the cards? The March sugar futures contract this week is attempting to stabilize after almost 12 straight days down. From a recent high of 15.37 to last week’s low of 13.02, the March contract has shaved off over two full points. We have seen this kind of price action since mid- 2017 but this move is different in that a new low has been carved out, taking sugar to its lowest level in years. This leaves the March sugar chart in vulnerable territory. A quick look at a weekly chart shows this market falling out of the bottom of a well-defined channel. Fundamentally the market remains under pressure as well. Widely trafficked and well known fundamentals include China’s decreasing imports, ever resilient supply from seemingly every corner of the globe and fund trader willingness to establish large short positions. Hightower Group, in their comment from this morning, highlighted the increasing open interest which they suggest speaks to the fund trader getting more short. This could be the case. The often discussed Index Funds upping their sugar position may also be contributing to the increase in open interest. Either way, what we may be left with is a market that could be running out of sellers and a fund trader that is yet again at risk of being whipsawed. This week’s COT report will shed some light on how short the fund trader category has gotten during the last few weeks. Traders could position for a bounce with March options that do not expire until the middle of February.
Sugar Mar ’18 Daily Chart