Sugar 'head and shoulders' may signal drop
Sunday, 20 September 2009
NEW YORK, Sept. 18 (Bloomberg): Sugar prices may decline as much as 16 per cent if futures don't top a 28-year high reached earlier this month and fall below a support level, said David Sadler, a Sucden Financial Ltd. manager, citing chart patterns.
On Sept. 1, raw-sugar futures for March delivery touched 26.25 cents a pound on ICE Futures US, the highest for a March contract since February 1981. Now the most active, the March contract may be forming a head-and-shoulders chart pattern. A drop below 22 cents may mean the price will slip to between 20 and 21 cents, Sadler said. Sugar ended yesterday at 23.93 cents.
"You can see the formation is more of a head and shoulders, unless the market takes out the head," Sadler said yesterday by telephone from London. "It could indicate further weakness, if it doesn't take out the highs."
A head-and-shoulders chart pattern indicates a possible bearish trend when the price falls below a support level, called the neckline, under three peaks created by successive rallies, with the highest in the middle.
While the supply and demand balance is bullish, this technical picture may develop in the absence of more buying from India, Sadler said. A decline to as low as 20 cents would erase gains since the beginning of August.
On Sept. 1, raw-sugar futures for March delivery touched 26.25 cents a pound on ICE Futures US, the highest for a March contract since February 1981. Now the most active, the March contract may be forming a head-and-shoulders chart pattern. A drop below 22 cents may mean the price will slip to between 20 and 21 cents, Sadler said. Sugar ended yesterday at 23.93 cents.
"You can see the formation is more of a head and shoulders, unless the market takes out the head," Sadler said yesterday by telephone from London. "It could indicate further weakness, if it doesn't take out the highs."
A head-and-shoulders chart pattern indicates a possible bearish trend when the price falls below a support level, called the neckline, under three peaks created by successive rallies, with the highest in the middle.
While the supply and demand balance is bullish, this technical picture may develop in the absence of more buying from India, Sadler said. A decline to as low as 20 cents would erase gains since the beginning of August.