Technical Analysis #C-SUGAR : 2016-07-13

Record sugar crops expected in US
USDA released its monthly World agricultural supply and demand estimates report (WASDE) where it forecasts production of sugar in US will be 3% higher than in 2014/15 season and 3.5% higher than in 2016/17 season. At the same time sugar imports to US are expected to fall by around 10%. Will it drive sugar prices lower?
Current sugar crop in US may surpass the record high of 1959/60 agricultural season. For this reason, its purchases in Mexico are to rise by 20% or by around 200 thousand tonnes. This volume may reach the global market and cause price correction. Now sugar prices are around one third above the level of early 2016. The additional negative for its prices is forecast of Brazilian agency CEPEA that volume of sugar cane processing in San Paulo state may rise on favourable weather conditions.


On the daily chart Sugar: D1 hit a fresh high since October 2012 two weeks ago and slightly corrected down. Now it has approached the support of the uptrend. The Parabolic indicator continue giving signal to buy which may serve as additional level of support. The MACD has formed signal to sell. RSI is below 50 and has formed negative divergence. The Bollinger bands have narrowed which means lower volatility. The bearish momentum may develop in case the sugar falls below the last fractal low, the Parabolic signal and support of the rising trend at 19.4. This level may serve the point of entry. The initial stop-loss may be placed above the last fractal high and high since 2012 at 21.2. Having opened the pending order we shall move the stop to the next fractal high following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 21.2 without reaching the order at 19.4, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
PositionSellSell stopbelow 19.4Stop lossabove 21.2