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Some setups lead us to believe that, in the medium term, the march 2016 sugar future may point south decidedly.

Volume Spread Analysis: sugar upthrust

First of all, looking at patterns (according to the Volume Spread Analysis), we can see that the last candle is an uphtrust (shooting star candle) with possible bearish implications.

sugar shooting star upthrust trading for purpose

Commitment of traders

If we look at the COT Index, the commercials bearish stance could confirm our guess.

The commercials have started to buy and, on the contrary, small and large speculators began selling: is a strong bearish setup.

sugar cot trading for purpose

Signs of market manipulation

Looking at the chart, we also notice the top has got a marked and well-know rounded shape.

As we know, this is a kind of top that many analysts consider typical of the 'market makers' activity: in this case, the continued uncertainty and ups and downs in the sugar market would have allowed the 'strong hands' to distribute high quantity of contracts without revealing too obviously their goals.

sugar rounded top trading for purpose

We noticed at least three strong reasons to be bearish, but remember that, as Lucretius said: "In this world nothing is certain except for a dark force that makes everything uncertain". Moreover, remember also that this is not a trade solicitation and, if you decide to trade, you do it at your own responsibility.

Sugar rallied powerfully since the end of September, but right now is showing signs of fatigue. It found a strong resistance at the market profile Point of Control and we think the time is ripe for a nice retracement. The volume has declined day after day during the whole rally and last week the march 2016 sugar contract wasn't able to break through the 14.5 level.

sugar daily chart

You might object that sugar could simply be pausing to re-accumulate before the next upside leg. We don't think so, mainly because the last COT reports show a violent rush to sell this contract by the side of commercials. Why should the sell so violently if they don't think sugar is already overpriced?

february 2016 sugar cot chart

Also the seasonal chart reinforce our vision: sugar is currently followinng its seasonal trend and, as you can observe in the following chart, it's got the tendency to decline from the beginning of october till the beginning of december. Maybe it could still produce a last spike higher, but we think we'll soon witness a nice deep retracement. Remember this is not a trade solicitation and if you decide to trade you do it at your own responsibility.  

sugar seasonality

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