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Sugar Rally Over? Watch the 50-day Moving Average

Posted 06/20/2019 7:39AM CTJoe Nikruto

This week’s comment finds the now prompt October sugar contract pulling back from a recent test of the 13.00 level. Healthy pull back as the market gathers itself for a new move higher or withering rally attempt dying on a declining volume vine? Could be too early to call this rally over, but while the Brazilian currency continues to show strength, price weakness casts suspicion on the ability of sugar to maintain an upward tilt.

Fundamentally, the voices calling out for declining production in 2019/2020 are getting louder.  Continued offtake of cane for ethanol in Brazil is supportive and the recent halt to the energy price decline doesn’t hurt either. Technically, sugar is testing the 50-day moving average. If the October contract is unable to hold this level, 12.59, the path of least resistance could be lower. 12.31 looms large as a level the market could gravitate to. While price action has the October contract back in a neutral or a trendless stance, a move below 12.31 in the October contract will have the potential to ignite selling and re-establish the down trend. However, talk of a down trend is premature before we answer the question asked by the 50-day moving average, especially with the funds still short, according to the COT. Stay nimble and don’t be afraid to take profits should you have them.

Sugar Oct ’19 Daily Chart

Sugar Oct '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."