Sugar’s Trampoline Act Reaches a Low.
Published by strudy1 May 29th, 2008 in Daily Diary, Find Profitable Shares.What happened to all the talk about sugar prices a couple of years ago? It stopped. And so did the huge run-up in the sweetest commodity.
In February 2006 the sugar posted a high at 23.14 US cents per pound. The highest prices since 1982! That’s changed though. Markets always change. Sugar fell all the way to 10.5 cents. Then it climbed back at the beginning of this year, reaching 15.80 cents in early March.
Up and down. Up and down. Rally, correction. Uptrend, downtrend. Sugar’s a hyper-charged market, and ideal for traders. If you’ve got the heart for it.
Since March the price came back to the ten cent mark. That’s a loss of 36% in just 3 months.
Sugar demand slowed because of a global glut and rising shipping costs. Countries like India and Brazil are producing more sugar cane as soaring oil prices increase the demand for ethanol. This new business opportunity for sugar makers has multiplied production.
On the long-term chart, the current prices have touched the first main support line. This price floor, which goes through the low prices of 2002 and 2007, is at around 10.20 cents.
Watch for a break in this support in the coming days. If it happens, the next target will be the “double bottom” area (points A and B on the chart) at 8.35 cents.
That could be an opportunity to buy. There’s only one big sugar company in Australia. Tomorrow we’ll see if their chart shapes up.
But today, we’re focusing on sugar itself. And a technical rebound is looming.
The Bollinger Bands show that sugar is finding excellent support on the lower band. If you see a correction downwards that begins from the upper Bollinger Band, it usually finds some support at the lower one. This is the case with sugar.
The Ultimate Oscillator is our favourite oscillator Today a bullish divergence is evident in observing both the Ultimate and the commodity price. Sugar has made a lower low that isn’t backed up by a lower low in the Oscillator.
The Momentum Technical indicator has also posted higher low. Bearish momentum is waning.
We see a correction to the upside in sugar. Our first target would be 11.80 cents. That’s the 50% rebound from this 3-month fall. Tomorrow we’ll see if that sugar producer has as good a chart.
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Good investing,
Gabriel Andre