Sugar is Cheap - 3 reasons to go long in August 2017
The Sugar Trade is in – based on market analysis. For someone that eats almost no sugar, I'm definitely interested in it now. Zombies are strange like that.
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Reason 1: In the last 10 years, comparable weekly MACD (momentum) turn and cross over signals at least a possible ~+15% retracement. The investigation begins.
Reason 2: Last 4 times the cycle statistical indicator (non-technical - chart below, 2nd panel) hit a statistical bottom boundary, it resulted in a good trade 3 of those times.
Reason 3: To corroborate, commercial sugar users have gone net positive on their hedging activities for the first time since mid-2015. The mid-2015 positive net hedging levels pre-empted big cycle shift of ~+100% after a period of consolidation.
Reason 4: Seasonality shows that September is a good month. Last 5 years, the price has closed higher 100% of the time. Even when you extend seasonality to 20 years, the expectation is still positive.
Popular ETFs: CANE and SGG.
Short term technical target: $0.16 (+15%) – Mean Reversion - quite likely.
Long term technical target: $0.20+ (40%+) – if we are lucky and this is the start of new major cycle retracement.
A possible idea is to go for the $0.16 target, take some profit to defray risk and see how it goes from there. Note that the daily MACD is on a short down cycle. You might want to wait a little before going in. However, September and October look to be good months and as long as the weekly MACD has still crossed up, it's a good bet.
Cheers! Don't forget to treat me to some coffee with a little SUGAR.
* Someone told me today that if the trade works out, I am literally her sugar-daddy.
Update: A favorable fundamental look at the price of sugar popped up just 3 days after my report. Check it out here - https://seekingalpha.com/article/4093187-state-sugar.
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** The author of this post has a long position in SGG.