Futures Outlook for the Week of 07/30/13
I want to take today’s opportunity to discuss Sugar, I will be looking at the Sugar #11 October 2013 (ICEUS) contracts. It may be time now, to start paying attention to what may start as a short term pop and turn into a trend reversal to the up side.
I look to charts that tell stories and I love to find things within them that intrigue me. This morning while looking at varying charts, Sugar is the one that captured my attention.
Here on the Daily chart, you’ll notice right out of the gate that Sugar prices have been in a downard run for quite some time. What I want you to notice next is that within the last couple of weeks you have seen a nice little upward move that could have been typical descending channel behavior. However, in the last couple of days you have had one day in particular with a pretty good spike in pricing intraday. That could always be an anomaly, but the fact that we have yet to retrace it in significant fashion lends itself to holding the strength inherent. We are at the cusp of breaking the trendline on short term basis via the daily chart so keep your eyes open for opportunity that could exist minimally in the near term.
Moving forward to our Weekly chart:
I see this chart in an interesting fashion. First, I have highlighted in red what seemed to me a descending triangle with support a little lower than 19.00. This triangle on the Weekly chart took approximately 9 months to build. Any time a pattern like this appears having dedicated that much time to the making, you should be attentive to the direction it suggests as large breaks can occur. We found that break here and have held the downward push via the descending channel highlighted in blue, for the duration of this year. At this time, the trend remains to the short side. I am writing on Sugar today, because I want you to pay attention to the next moves and I wanted to bring some of your focus to what could happen next. The push that I showed you on the Daily chart, if it continues and does break the short term trend, will enable a potential break on the Weekly chart as well.
When looking at the Monthly chart, you can see that we have been in a much larger overall downward trend that has lasted two and a half years, give or take. What I find absolutely intriguing on this chart is the way that we have defined very neatly, this latest descending channel. It has been extremely clean on tops and bottoms and in my opinion, has tightened Sugar up immensely. Sugar needs a break and I will be watching it for a break to the high side.
Knowing that the downward trend is technically still in play, you do need to exercise caution. If it were to continue to fail, I would personally expect an initial stall around 14 or so and then if it still had power on the decline, I think it would get really sticky on the way down towards 12.
That being said, when I look at a set of charts like these, I can’t help but lick my lips. I do have a bit of a sweet tooth, but that doesn’t compare to the amount of potential Sugar has for a high side swing. This commodity has been building and storing power in these charts for quite a while and an explosive move higher would be a great resolution.
Keep watch on the Daily chart and the day-to-day moves. Watch to see if we can truly break out on the day. If we break the day and build a new consolidated base from which to move, you really might see a much longer term opportunity of a bullish nature in Sugar.
If any of you would like to participate in a move on Sugar, you should know that you don’t have to assign a lot of capital or a significant amount of risk. You might actually consider using options to allocate lesser capital in a fixed risk scenario. That would allow you to satisfy your cravings without too much associated cost.
Remember, that we are here to keep your options clear.