Technical Analysis #6 - Sugar
Markets often give a second chance to folks who missed a good entry or exit. How price moves on a second chance tells a lot about the asset.
In newsletter #2, I introduced above concept of second chance in the financial markets. Let's see that taking place in Sugar now. Below is my view of its 15-year monthly chart.
I consider the 2 blue lines as primary reference lines which guide price movements for Sugar. Notice the right side of the chart, price managed to cross above the top line, continued to go up firmly, then eased back down to the line at orange circle.
That is the second chance for bulls who missed the original good entry price to long Sugar. If the market is bearish, price could just fall through that line. If it is bullish, which I believe it is, price would bounce back strongly from there. I'm not speaking in hindsight, I posted a couple of months ago why I think that is a reasonable buy point.
Looking closer at the orange circle, there was a monthly close below that line, followed by a monthly close above that line. This is the market saying that a price breakdown below that line has been rejected, suggesting that the Sugar market has found a bottom.
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Zooming in closer to the weekly chart, you could see the aggressiveness of the bulls to long and bears to cover their shorts. In just 1 week, the price of Sugar has gone up 18%. (Post was written last weekend when my kid was in class. Sugar has gone up another 5%.)
Given that there are so many large food companies using this critical ingredient for their products, it does not take a genius to come to the conclusion that those large food companies are going to take long positions in this market to hedge their costs, in the event price continues to accelerate upwards. Or they risk losing customers by raising price.
Their desire to hedge would reasonably be expressed as more demand in the market, leading to price appreciation. That in turn attracts hedge funds and professional traders into taking long positions. The net effect could be a sharp accelerated rally ahead for Sugar.
I've been long on Sugar since Nov 2023, as part of building a basket of commodities positions. My portfolio is effectively 60% long on commodities because as a group, the price movements of different commodities are telling me that they are heading into a bull market.
That's it, you have just learnt another example of second chance in the markets!
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Lastly, I don't have any books, courses, consultation or anything else to sell. I'm doing this purely for goodwill and because I become better myself through sharing. Above is not financial advice but merely my view of the market. For more on my background, see https://www.dhirubhai.net/pulse/technical-analysis-1-coffee-ken-soh-dveoe/
SG100 WIT 2023 ? SkillsFuture Fellow ? Chief Intelligence Officer ? Coach ?vCareer Advisor Coach
5 个月I was working on sugar futures prices along with interest rates before . Futures prices are affected by delivery schedule as well .
SG100 WIT 2023 ? SkillsFuture Fellow ? Chief Intelligence Officer ? Coach ?vCareer Advisor Coach
5 个月Hi Ken, which sugar prices did you use?