Is the “Baby’s” Sugar High Over?

sugarBy Cynthia Kase

The market’s been watching the impact of El Niño since June. Then the National Oceanic and Atmospheric Administration said there was a 90 percent chance the baby would stick around all summer, and maybe even into 2016. Sugar has been rising since mid-August, as El Niño persisted, but turned choppy in October only to break to 15.53¢ as of the 3rd.

Apparently Niño’s wet weather is delaying the sugar harvest and fears have grown about undersupply. The technicals have been positive but slammed up against resistance at 15.53¢. So while it’s too soon to say if 15.53¢ is “it”, there is likely more downside.

15.53¢ is important for a few reasons. It failed by 5 points to reach the 21 percent retracement of the entire move down from 36.08¢ to 10.13¢ on the continuation chart. Second, the Stochastic and RSI momentum indicators were set up for bearish divergences at that price. Most important, 15.53¢ was a confluent target, as shown in the chart. That price is just 0.01 points shy of March’s “trend terminus” target (12.55^3/11.28^2) for the first wave up from 11.28¢.

SBH6_Fig1Charts created using TradeStation. ©TradeStation Technologies, Inc. 2001-2015. All rights reserved. No investment or trading advice, recommendation or opinions are being given or intended.

First support was met on Wednesday at 14.64¢. Next is 14.40¢, just 7 points below Thursday’s low. This is the 21 percent retracement for continuation’s entire move up, and a confluent retracement for the intermediate swings on both charts. It is also the 0.62 projection for the wave 15.53 – 14.47 – 15.05.

The key question is whether the decline, which only reached 15.47¢ versus 15.40¢ support, is over. The fact that the bounce up from 15.47¢ formed an ABC pattern where C is the 1.62 extension of A, exactly, and that prices then declined to 14.59¢, that is, below the prior 14.64¢ swing, means probably not.

14.40¢ remains to be broken, so a continued decline is not a sure thing, but 14¢, the major threshold, is likely.

The open and midpoints of candlesticks constitute support and resistance. Last week’s midpoint was 14.37¢ and the open for the week ending October 9, the last large up week prior, was 13.92¢. There’s also an important swing at 13.94¢. So as long as this holds (the lower end of a 14¢ +/- 0.1¢ range), odds are open for the bull market to resume.

Initial resistance is 15.40¢. The decline isn’t dead unless this is overcome. Above this, a highly confluent 15.95¢, the last remaining target (the Phi^3 corrective projection) for the first wave up, and occurs as a target 10 times for the 10 waves up from mid-October’s 13.69¢ swing low. The highest price to which the March chart projects which has a moderate probability is 18¢, the 0.62 projection of the entire move up.

Send questions to askkase@kaseco.com, and click the link learn more about Cynthia Kase’s latest video series, Kase on Technical Analysis.

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Cynthia A. Kase, CMT, MFTA, is an award winning market technician and former naval officer, holds a BS and ME in chemical engineering and was employed in that field for 10 years before becoming an oil trader in 1983. After working for Chevron, Chemical Bank and the Saudi Oil Ministry’s consulting arm, she launched Kase and Company, Inc. in 1992. Known as an innovator in technical trading and forecasting, she has had a dual career as an energy hedging advisor and as an inventive trading system developer.

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