Azucar – A Changing of the Guards

Clearly the trend has been lower in sugar for the last two years with futures currently trading nearly half the value they were trading at 25 months ago. It does appear that we are consolidating just above the 16 cent level and we may have found an interim bottom. Within the last few weeks futures have shown signs of life and have traded above the down sloping trend line that has capped any advances for the last two years. What if we are shifting from a bearish market to a bullish market? I drew red horizontal lines on the chart below to identify consolidation levels on the weekly chart. My first objective comes in just below the 50 day MA (red line) below 18 cents. My suggestion is to scale into bullish trade in 14’ contracts looking to add length as the market proves you are correct.

There is very little in the news specific to sugar (aka Azucar) that has been market moving so for the most part sugar has been looking for guidance from outside markets. The COT is not screaming anything bullish just yet with funds building a net short position. The weather for now remains a bearish force. The Brazilian Real and other major emerging market currencies have continue their recovery from multi-year lows providing mild support. Exports may be less aggressive in major sugar producing countries if these currencies continue to recover. We are experiencing a down-tick in planted acreage in Eastern and Central Europe in addition to declines in Russia and the Ukraine.

As long as the tug of war continues expect a base building process.

Sugar (Azucar) Futures chart for September 3, 2013

Sugar (Azucar) Futures chart for September 3, 2013

In the last two months sugar has consolidated in a 1 cent trading range. My suggestion is to accumulate 14’ contracts when near the lower end of the recent range just under 17 cents/lb. Clients have started to buy multiple future contract months in 14’ and I am also open to buying just out of the money calls.

Current Sugar prices are as follows:

  • SBH14-16.97
  • SBK14-16.89
  • SBN14-16.84
  • SBV14-17.11

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Bradbard Research

As always, I’m here to discuss specifics and give guidance. Shoot me an email…Give me a call… you can reach me at: mbradbard@rcmam.com or 954-929-9997

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.

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