Noel CampbellYes, it’s true. I’m going to start talking about Sugar again! It’s been very kind to me and many of our Safety in the Market traders alike. It could be time for more of the same.
For well over 24 months now I have been a raging bull on the Sugar market. This contract is traded on the New York Board of Trade (www.nybot.com). The ProfitSource Software symbol to use is SB-SpotV. Since February 2004 we have experienced a solid bullish run, with prices rising from 5.27 cents per pound to a recent high in February 2006 of 19.73 cents per pound.
When I last spoke about Sugar in November 2005, it had just broken through a major top that occurred in October 2000 (11.40). Once prices surpassed that previous peak it was all systems go for a bull rush as prices moved from 11.13, after settling on the old top, to the current high of 19.73 in only 3 months! That’s a move of over 860 points (ticks).
On the way to the recent top, prices have again pushed through the resistance of old major tops. Chart 1 is a weekly bar chart for Sugar from the late 1970’s to present. The two tops that have been broken occurred in 1990 and 1995, the highest of which occurred on 16 March 1990 (16.28). After having reached the February top we have seen the price declining in a very ‘grinding’ fashion, back down to a low at around 16.20, forming triple bottoms. Quoting from W.D. Gann who says, “Old tops, become new bottoms”, it would certainly appear that the tops of 1990 and 1995 are now providing the market with the support it needs.
Chart 1 – Weekly Sugar Futures (SB-SpotV) Bar Chart
click chart for more detailMeasuring ‘time by degrees’ from the 3 February top, we are presently at the key period of 90 degrees out from the high. While the position of the market suggests that we are not going to see a ‘cyclic’ low on this date, it may in fact be a time when an indecisive market gets its act together and starts a big move. If the old tops continue to hold as support, we have nothing but ‘clear air’ ahead. Chart 2 shows in more detail the recent market action on the daily bar chart, where the triple bottoms have been indicated for you.
Chart 2 – Sugar Daily Bar Chart (SB-SpotV)
click chart for more detailTraders looking to take advantage of this bullish set-up would most likely be looking to trade the July contract for Sugar at present and then move to the October contract nearing the middle of June. Trading for the July contract ceases on the last trading day in June. Prices are quoted in cents/pound and trades with a ‘tick’ size of 0.01 cents/pound, which is worth US$11.20 per contract (a ‘tick’ is one minimum price move).
The potential for the upside on Sugar here is very exciting, but remember to only trade it according to your plan, use predetermined stops and keep your eye on the ball. At present there are several markets with very interesting set-ups and Sugar is definitely one of these markets, which I will be watching very closely.
Until next time…
Noel Campbell