RJO FuturesCast

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Technical Correction Looms But Rally Potential Unclear At This Time

Posted 02/21/2018 3:27PM CT | Joe Nikruto

This week’s comment finds the May sugar futures contract languishing or maybe marking time. As of this writing the May contract was back down near the recent lows carved out mid-January.  Eleven days prior sugar had managed to surmount and even close above the 18-day moving average, a positive development. Almost as fast as sugar had arrived in positive technical territory, a near 45 point downdraft put the widely traded contract back on the defensive.  Since then the May sugar futures contract has eroded in price while open interest has increased with the trade shifting from March.  Volume has also waned.  Is it possible the May contract has run out of sellers?  This morning the Hightower group issued their daily comment and noted that sugar maybe “should” be trading lower with talk of another smaller surplus next year.  This is a valid point. While we may, yet again, be at a technical pivot, the May sugar futures contract appears to be holding up rather well.  If sugar is going to hold and advance from here this is where it will have to happen. Short term traders trying to catch the falling knife likely have stops below 13.15.  The May sugar futures contract is now squarely in oversold territory.  Fundamentally, I can’t see anything on the horizon that could be construed as bullish enough to sustain a lasting rally. That typically means a bottom is near. 13.57, where we currently find the 18-day moving average, and 13.96 the 50-day moving average are the two levels that loom overhead. A technical bounce cannot be ruled out. Aggressive traders could look to position for that technical bounce but remain nimble even if the market starts chopping into overhead resistance.

Sugar May ’18 Daily Chart

sugar_may18_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."