Commodity Chart Of The Day
In the last three weeks, sugar prices have depreciated 11% to trade at fresh contract lows -- just above 19 cents. This has dragged prices on the March futures contracts on both the daily and weekly charts to over sold levels and put long entries back on my radar. I do not recommend catching a falling knife with any size, but scaling into longs lightly is a viable play, in my opinion.
What one should notice on the weekly chart above is futures are testing a trend line that has served as support since mid-2008. Additional analysis also shows that prices are very close to completing a 61.8% Fibonacci retracement. I think prices are very close to a value zone, and I see limited downside from here. I expect to have a number of bullish strategies in both futures and options in the coming weeks. My interpretations is also before the apex in the triangle formation on this chart, we will see a breakout. My bias is to the upside, so in the coming weeks expect an upward trend to get under way.
It may take several months to develop, but for swing trades, this is an ideal set up. My current trades for clients will be in March, but I'm not opposed to splitting buys in forward contract months. There is enough volume in May and July contracts for those searching for more time. A trade back to the 200 day MA on this chart reflects an appreciation of 16%, and that is my first target … trade accordingly.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.