RJO FuturesCast

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Softs

Sugar Poised for Upside Technical Breakout

Posted 09/06/2017 1:40PM CT | Joe Nikruto

This week’s comment finds the October sugar futures contract poised for further gains. Since our last note, the market has managed to surmount the 50-day moving average and hold above a newly turned up 18-day moving average. The 18-day comes in at 13.71 and is now the downside level that sugar will have to take out to remove the bullish cast from the chart. 13.60, the recent low from the last 9 days worth of consolidation will also be a good line in the sand for traders who are not looking to stay long in the face of what still remains rather bearish fundamentals. Typically, consolidation like we have seen in the last week is resolved by the market moving in the direction it was moving in before it began to consolidate. An upside breakout places the market squarely in the 15.25 and higher range. Funds are still short. Recent upside price action has both been caused by fund short covering and created more fund short covering. The last measured fund short position, as of Aug 29, was about 120,000 contracts, around 6k less than the previous period as listed on the Reuters COT page. This week’s reading should show the fund short position shrinking further. Trend followers will be forced to cover further if price continues to rise. Long signals for many fund trading participants will be generated in the 15.13 and 15.17 area. My guess is that a move above those levels will cause commodity trading funds to switch from short to long rather abruptly. Fundamentally, it is difficult to see a sustained rally in sugar taking place. But, funds getting whipsawed can provide for enough movement in price for our purposes, even if your risk profile suggests options are the way to play. 

Oct ’17 Sugar Daily Chart

Oct '17 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."