ICE bears pound sugar prices lower
Published: 03/09/2010, 5:18:04 PM
ICE May sugar futures collapsed to fresh lows Tuesday, as the contract hit its lowest level since early October 2009, according to Dow Jones.
The stair-step decline evident on the daily chart underscores the strength of the bearish technical trend and additional losses are likely ahead.
The ICE May sugar contract has tumbled far and fast in recent weeks, as the bears etched a major long-term technical top on the daily chart. Since Feb. 1, ICE May sugar has fallen from 29.00 cents to Tuesday's intraday low at 20.53 cents.
Daily momentum tools--including slow stochastics and the relative strength index--are trending lower and remain negatively positioned, which should keep the bearish pressure on price.
Tuesday's sell-off, however, has stalled just ahead of significant daily chart support from Oct. 9, 2009 at 20.44 cents. That level represents the low of a four-month long sideways, consolidation range from the fall of 2009. Very short-term, that 20.44 cent level could offer a stalling point or could be tough to crack on a first test.
However, the technical trend remains bearish and the odds favor a decline through that support level.
Paul Hare, executive vice president at the Linn Group said that ICE May sugar "has been undergoing a lot of liquidation."
He pointed to the 20.44 cent support zone and said "once you break through that you'll see increased [selling] pressure."
Overall, Hare said he calculated a price projection on a measured move from the Feb. high to the Feb. low, which targets additional losses in ICE May sugar to the 19.41 cent level.
Short term, Hare said "I'd be selling on a small rally, but only for a 100 point move. I'd look to cover shorts around 19.50/19.40 cents," he said. Hare pointed to the weekly chart for sugar and said it suggests the market will find support around the 19/20 cent zone.
Veronique Lashinski, technical analyst at Newedge, pointed to the weekly front month continuation ICE sugar chart and said, "As long as sugar remains under the 38.2% retracement at 23.42, we will be looking for this market to resume its decline.
"Next continuation support is approximately 20.50, then 20, followed by the 61.8% retracement at 19.11," Lashinski said.