RJO FuturesCast

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Softs

Upside fakeout in sugar, but downside isn’t a lock just yet

Posted 09/20/2017 3:26PM CT | Joe Nikruto

This week’s comment finds October sugar futures homing in on traders who are long, short, and anything in between. Not even the sidelines seems to be a safe place to hide. Three trading sessions ago sugar was offering long term traders the chance to jump aboard the next big upside breakout. With October trading above 14.50, traders were forced to enter new long positions and exit any remaining shorts. As of September 12, over a week ago, noncommercial funds were short about 95k contracts. It is likely that much of that position was covered going into Friday, September 15. However, the last three trading sessions have seen the October contract come from 14.58 down to 13.72. The result of this move was significant technical damage to the chart and to the psyche of traders who had just entered long positions on Friday. Fundamental news flow from the wires has again turned bearish with word of a large trade house delivery. Hightower group also highlighted that “curbs on production and exports, which have been in place since 2006 (in Europe), are set to expire on September 30.” I am not sure that is as bearish as it sounds. Where has the sugar been going since 2006? But, any increase in production in a time of surplus has to be reckoned with. Today’s price action, which put sugar back above 14.02, leaves recent bulls with more than a glimmer of hope. If the October contract can see a number of closes above 14.00, the funds may be emboldened to attempt to protect the position and try to paint the chart. Failure to stay above 14.00 should leave new arrivals to long side under pressure, and likely to head for the exits. 13.40 and 12.90 are levels that should they be breached will result in an increase to the size of the fund short position and possibly a move to 12.00 or lower.

 

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."