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How Sweet Is It?

10/14/09 09:04:00 AM
by Austin Passamonte

Here's the near-term to medium-term outlook for sugar futures.

Security:   #11 Sugar Futures (SB)
Position:   N/A

One of the biggest commodity bull runs this year has been staged in #11 sugar futures. Lows of less than $15 to highs of greater than $26 inside 2009 was one heckuva run. At $1,120 per SB contract on a one-cent move, sugar sure did cover some ground.

FIGURE 1: SUGAR, WEEKLY
Graphic provided by: TradeStation.
 
Things got a little spiky or whippy from 23 cents through 26 cents over the summer. Measuring projection from the 1-2-3 swing lows on Figure 1 pegs high resistance around $23.50, which certainly did contain the whipsaws. Not drawn is a general diamond pattern of mirror wedges, which usually forecasts lower price ahead. In this case, we see exactly that.

FIGURE 2: SUGAR, DAILY
Graphic provided by: TradeStation.
 
Second half of that diamond pattern is this broken wedge as depicted in Figure 2. See where price coiled tightly, then broke upside hard for three days? The subsequent reversal makes it appear to be a blowoff high, due for a measured pullback to 18+ range via 1-2-3 projection lower.

FIGURE 3: SUGAR, WEEKLY
Graphic provided by: TradeStation.
 
That zone correlates to a 62% pullback from a low to high swing near the 19-cent zone (Figure 3). Parabolic moves like that often resolve themselves in diametric fashion... the other way; 19+ to 20-cent range is layered support and should hold a pullback consolidation if further upside has any potential to come.

Sugar made some sharp moves following a steady ascent this year. It's only natural for it to relax a bit, consolidate extreme swings, and look for direction ahead from there.



Austin Passamonte

Austin is a private trader who trades emini stock index futures intraday. He currently trades various futures markets from home in addition to managing a trader's educational forum

Title: Individual Trader
Company: CoiledMarkets.com
Address: PO Box 633
Naples, NY 14512
Website: coiledmarkets.com/blog
E-mail address: austinp44@yahoo.com

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