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After Dramatic Decline March Sugar Consolidates

Posted 01/24/2018 3:03PM CT | Joe Nikruto

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

sugar_mar18_daily_chart

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Joe Nikruto

Senior Market Strategist
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."
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