The past twelve months have not been kind to sugar investors.
Contract prices have fallen from a high of $26.20 in March to the
current price of $19.57 (/SB - Dec) - a 25.3 percent decline.
In fact, as the three-year daily chart at the bottom of the
article shows sugar prices have been in a downtrend since hitting
an all time high of $36.08 in February of 2011. Sugar futures
have a tendency to undergo large swings once a trend is
established, and it appears as though another large move is about
to take place. As the magnified one year daily chart below shows,
since recently finding support around $19.25, sugar has twice
tried, and subsequently failed, to close over $19.68.
Tuesday's action saw contract prices once again bounce off
support at $19.26 and rise to an intraday high of $19.77 before
quickly selling off and closing at $19.57.
Needless to say, something is going to give. Whether that
"something" is $19.25 support or $19.68 resistance remains to be
seen, but the corresponding move will likely be substantial.
Should sugar futures break below $19.25 support, the 52-week
low of $18.81 will be squarely in the sights of bears, as it is
an oft-used stop out level for current longs. Once breached, a
wave of sell orders should be expected as bulls abandon their
positions and fresh shorts enter.
Looking at the three-year chart at the bottom of the article,
once $18.81 is broken, no support comes into play until $17.51
(8/10/10), with no major support emerging until $15.00 (6/18/10
and 6/29/10) - 10 percent and 23 percent lower than current
prices. Conversely, should bulls be able to orchestrate a close
above $19.68, it would set up a run to the next resistance area
A breach of that level could signify a key turning point in
the trend as it would equate to a higher low and higher high.
Beyond $20.50, no resistance comes into play until $21.77. Time
will tell. The above analysis can also be applied to
Teucrium Sugar (NYSE:
) and iPath DJ-UBS Sugar (NYSE:
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