RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Softs

Sugar Chart Points Lower

Posted 01/31/2019 11:49AM CT | Joe Nikruto

This week’s comment finds sugar trying to hold above last Friday’s low. March sugar futures dropped from 13.01 to 12.37 with over 120k contracts trading hands. Big drop on big volume. This was even more notable as it came on the heels of an upside breakout on heavy volume just 6 sessions earlier. To my mind, what’s left on the chart is a wholesale rejection of the 13.00 level. Since then sugar has labored mightily to regain the higher ground near 13.00, trading as high as 12.93 and 12.85 in succeeding sessions. So far, that work has been in vain, but right now March sugar sits at 12.77 and has been as high as 12.85.  Chart watchers will also note that sugar in the 12-13 range occupies a kind of technical middle ground that can make attempts at a directional call treacherous. Still, it may be that chart is portending better news on the horizon from global sugar producers.

Wire services in the last few months have been rife with banks and associations tied to the production of sugar calling for dramatically reduced sugar supplies this year. Recent technical action may be telling us that revisions to these calls are forthcoming. Again, because of where sugar is currently, treading water it won’t take much to reinforce either a bullish or bearish view on the charts.  Yesterday’s Hightower comment highlighted the fact that there has not been a Commitment of Traders report for some time as the government has been shut down. Hightower holds the opinion that the fund trader category often referred to as Managed Money or Large Speculator holds a large, maybe excessively large, short position.  Since the report has not come out in so long it is impossible to know for sure, but with the March contract recently trading over 13.00 it is very difficult to see the fund category maintaining longs in the face of such price strength.  The CFTC intends to begin releasing the delayed reports in piecemeal fashion. Here is the text from cftc.gov:

“COT: The last COT report was published on December 21, 2018. Reports going forward from that date will be published in chronological order beginning with the report previously scheduled for release on Friday, December 28, 2018 (based on data from Monday, December 24, 2018).  The CFTC expects to publish this report on Friday, February 1, 2019.  After this, the CFTC expects to publish one report on Tuesday and another on Friday of each week until the reports are current as per the normal schedule.”

That isn’t awkward at all! Why can’t they just release all the reports at once and get everyone caught up? Our tax dollars at work, or rather, not at work.  Sugar, technically, is suspect and points to lower prices. As mentioned above, it won’t take much to change that so trade with care no matter which side of the bull/bear discussion you occupy.  This area, while indeed a tough place to take a shot, could reward those who can take the risk. Looking at March puts, we notice there is only 15 days until expiration. The May options offer 74 days until expiration at only twice the premium.  Traders who think sugar can drop hard and fast could have the March options for very little in the way of premium cost, but time waits for no person. If one is going to position for either short side or the long side, it might be wise to spend up for the May options and the extra time. One way or another sugar isn’t going to be sitting here at 12.80 come April.  Keep your eyes on the headlines for sugar in case some new fundamental comes along to save the day for the bulls. Closes outside a 13.25 – 12.05 channel can be used be used to toggle exposure or manage risk, long or short. 

To learn more, please check out our free Fundamentals of Trading Softs Guide.

Sugar Mar ’19 Daily Chart

Sugar Mar '19 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."