Keeping an eye on sugar

(Futures Mag) – Curious price action in the sugar market following last Tuesday’s spike in prices has put the spotlight on sugar as price threatens key technical levels on the chart.  The previously mentioned spike in sugar ran was halted by a significant Fibonacci confluence zone, an area where two Fibonacci retracements from two separate price ranges overlap, at the 16.40 level.

Prices were unsuccessful in surpassing this key technical area and have since slowly reverted back toward support around 15.50.

Furthermore, the intermediate-term descending trendline on the chart became relevant right at the 16.40 level of fibo confluence, thus adding to its structural significance.

As we head into today’s session, this trendline will likely intersect price around 16.15, which could add further selling pressure into the market around this level.  Ultimately, the market has been trading in a sideways range from roughly 15.50 – 16.40 over the past few days and the price action over the next 5-7 days could be very significant in determining the future course of this market.  The reason for this is that any sustained strength above 16.40 would mark two significant technical events that warrant recognition.

First, it would represent a sustained upside break from the intermediate-term descending trendline that has governed the bear trend in sugar for some time.

Second, it would solidify (if confirmed) a positive breakout above the previously mentioned fib confluence zone at 16.40.  With that being said, there is an additional Fibonacci confluence zone from 16.62 – 16.65 that could also provide resistance to price; however, it would appear as though the trendline and 16.40 pivot will provide traders with a good barometer of market sentiment.

If prices are unable to penetrate the descending trendline and fail to hold support at 15.50, the pendulum will likely swing back in favor of the bear campaign; however, a sustained move above 16.40 could be an early indication of a coming bottom in sugar, or perhaps even an already established bottom at the 11/6 lows (15.42).

At any rate, traders should keep an eye on these key technical levels in sugar to assess potential trading opportunities in this market.