Wednesday Evening 6 April 2011
The upside potential move in sugar did not develop, as anticipated.
The long position from 27.19 was stopped out on Tuesday at what
turned out to be the low of the day, 27.43. Instead of an upside
move above 28, price came back into the trading range. The was
confirmation that sugar was not ready to go.
In the analysis, a weekly chart and two 30 minute charts were
presented. A daily chart was not included. We also said to be
careful when using multiple time frames,
[see Sugar - A Developing Trade, click on http://bit.ly/gkwkbZ,
first paragraph after second chart]. The weekly chart has a decent
set-up potential, and the 30 minute intra day charts were used as
triggers. A look at the daily will show why the upside breakout did
not yet develop.
The immediate trend remained down, as shown by the swing lines
drawn in to capture a lower high and two lower lows. The sideways
activity since mid-March can lead to a change in trend, but it has to
first be proven. An upside breakout over 28 cents would have
indicated a change, but there was no price advance when the
opportunity was ripe.
Our stop-out was the low of the second to last bar. That was the
market telling us that 28 would still hold as a resistance area.
Wednesday's activity, the last bar, was a wider range on increased
volume and a poor close. Clearly, sellers were in control. Anything
can happen in a trading range. Price could stop on Thursday and
reverse back up or retest the lower end of the range, or even
continue to make new lows.
By following the market's lead, that left no guesswork involved.
Standing aside with a small profit after a failed probe higher made
sense. Now we get to watch and see if a new potential evolves.
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