Sugar #11 futures in March 14′ have retraced 38.2% and are challenging the trend line that has served as support since futures put in a bottom in late August. As of this post price action has dragged futures under their 20 day MA (red line) as seen below. This is the first trade under that pivot point since 9/6 when this contract was trading just above 17 cents…current trade 18.55 or 8.5% above that level. The next support level is seen at the 50 day MA (light blue line) that currently comes in at 18.27. Much of the recent appreciation has been a result of improving global demand (Brazil for ethanol and China potentially building inventories) and ideas that the supply issue ahead would be less burdensome.
I had advised last week to lighten up on bullish trade or to gain bearish exposure for a retracement. The easy money has made made on short plays in my eyes so I have advised swing traders to start working back into bullish trade. The spike that occurred on 10/18 that lifted futures briefly above 20 cents/lb. caused by a fire at a terminal in Brazil was likely an overreaction. Though the Copersucar terminal will be off-line for some time it does not appear to effect the overall export expectations of Brazil. End users have been able to source sugar from Australia, India, Thailand and Pakistan with these countries picking up the slack.
So the correction has played out let’s get back in the BULL camp…
I am operating under the influence a major low was established this Summer and I will be playing from the long side using the Fibonacci retracement levels to help guide me with entry and exit with clients.
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