Sugar has been one of the worst performing commodities y-t-d with prices currently 16% off their highs but the idea is buy low right. I’ve suggested scaling into bullish trade in recent weeks and it looks like appreciation is underway with prices in March 13’ futures nearly 8% off 12’ lows. I like the idea of bullish positioning in futures while using options as a hedge; whether it is buying out of the money puts or selling out of the money calls 1:1. As long as prices do not make new lows I like bullish trade.
My suggestion is to use the Fibonacci levels as your upside targets. The light blue line is identified as the 100 day MA while the green line is the 200 day MA on this contact. In the coming months I expect both levels to be penetrated. While the chart above is a daily chart taking a longer term perspective and investigating the weekly chart on sugar it also supports my view of a possible change in trend in recent weeks. Ultimately into next year though it may take rolling into forward contracts I think prices could be north of 26 cents.
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