Sugar’s Back on the Table

Back in late 2003 I wrote about the potential for an explosive run in Sugar based on 30 Year cycles. Let me say right up front that the Sugar market did not take off in late 2003 as I anticipated it might. The good news was that stops took out the trade like they should and the powder was kept dry for another day. But it does pay, not to take your eye off the ball, if things don’t work out first time around.

During 2003 I also wrote about the Soybeans market and the anticipated explosion in prices, which could run up until as late as, September 2003. Here I was working on 30 Year, 20 Year and 15 Year cycles. Pretty big time frames in anyone's language and a few months grace shouldn’t be too much to ask. In Chart 1 we have the action on the July Soybeans market highlighting the rally in Soybeans over the past 6 months. This rally represents a price explosion in any traders’ language.

With the lateness of this eventual rally in Soybeans in mind, there is no reason to discontinue stalking Sugar. The rally may very well be yet to come. Sugar is back on the table. Sugar has managed to make new lows for the bear cycle in February 2004. However the market action over the past three weeks has been very encouraging for the bulls.

This week technically I want to speak about the ‘form reading’ of gaps. When the market has made a bottom it can often gap away to the upside and simply continue to power away. We saw that with the SPI200 contract following the March 2003 low. Check your charts. In Chart 2 you can see where I have circled two recent gaps on the Sugar market, that are indications I’m certainly watching in my own trading. Last week the Sugar market presented an ABC Trading opportunity on the long side. This followed the two gaps to the upside. Gaps can indicate that prices were oversold, and markets are almost invariably oversold at lows. The ABC Trade is progressing well with the market having just crossed the 50%, putting the trade in a no risk situation now.

Markets will gyrate, that’s the nature of the beast. Whether or not this is a major low for Sugar remains to be seen. Trades have to be taken according to the rules of your trading plan and stops always used correctly. You can’t fall in love with your outlook on the market as that leads to complacency.

Until next week......

Noel Campbell