Sugar Set For Correction (W,M,Y)
Created on Sunday, 27 March 2016 01:39
Written by Austin Galt
The sugar price has traded exactly as outlined in analysis titled, Sugar Technical Outlook, produced back in September 2015 and has seen price increase by just over 50%.
That analysis outlined the expectation for price to trade up to around the $16.25 level. Price just hit a high of $16.75 before reversing back down impulsively. I believe that completes the intermediate term rally.
Let’s review the technicals beginning with the weekly chart.
SUGAR WEEKLY CHART
W can see a five wave move off the low at $10.13 which I now believe to be complete.
The two horizontal lines denote previous swing highs which price has surpassed so a higher high is now in place. All that is required now is a higher low and the bull trend can really kick into gear.
The Bollinger Bands show a last gasp rally that got back up to the upper band. Price actually traded above the upper band which is a common feature found at significant tops.
I have drawn a Fibonacci Fan which shows the end of the fourth wave at support from the 76.4% angle while the recent high was at resistance from the 50% angle. I now expect a correction back to at least the 88.6% angle.
I have added Fibonacci retracement levels of this move higher and as the first correction in a new bull trend often makes a deep retracement I am looking for a move back to at least the 76.4% level at $11.69 and possibly the 88.6% level at $10.88.
Both the RSI and MACD indicator show a bearish divergence at this price high.
Now let’s update the monthly and yearly charts with the added data from the last six months.
SUGAR MONTHLY CHART
We can see the 5 point broadening top formation we have been following. This began with the point 1 high in 2010 and we now look to have the point 4 low in place as of 2015. It may take several more years before the point 5 high completes the pattern.
I have added Fibonacci retracement levels of the move down from point 3 high to point 4 low and previous analysis produced six months ago outlined the expectation for this first rally to end around the 23.6% level at $16.25. Price spiked up marginally above this level to a high at $16.75 so that’s looks pretty good.
The Bollinger Bands show price is back up at the upper band however there is often some movement between the bands during trend changes and I favour a move back down to around the lower band to put in a higher low.
The RSI showed a new high recently which is bullish while the MACD indicator is trending up and looking bullish.
SUGAR YEARLY CHART
I have drawn two Fibonacci fans so let’s run through them once again.
The bearish Fibonacci Fan drawn from the 1974 high to 1985 low shows the 2015 low around support from the 76.4% angle. This is after the 2011 high was at resistance from the 88.6% angle and I now expect price to move back up to challenge and ultimately overcome this level.
The bullish Fibonacci Fan drawn from the 1985 low to 2011 high shows the 2015 low right around support from the 76.4% angle. Nice.
I have added Fibonacci retracement levels of the move up from 1985 low to 2011 high and the 2015 low was bang on support from the 76.4% level. Nice again.
The Bollinger Bands show price dipping below the middle band before support came in and pushed price back up to it. I now expect a move back down In order to test how strong the support from this middle band really is. I favour it is strong and price will bounce back up immediately.
The Stochastic indicator is bearish although that is to be expected after five years of downtrend. It may take another year of price trending up before we see a bullish crossover.
Summing up, price has behaved as expected over the last six months and the expectations going forward from here are for price to make a deep correction before exploding higher.