Sugar Prices Poised for ‘Explosive’ Move: Technical Analysis

By Yi Tian

Nov. 13 (Bloomberg) — Sugar traders should watch out for an “explosive” price change in the next two weeks, according to a technical analysis by LaSalle Futures Group in Chicago.

Except for a “false breakdown” on Nov. 10, intraday lows have been higher and highs have been lower for raw-sugar futures since the price reached a 28-year high of 25.43 cents a pound on Sept. 30, said George Kopp, a LaSalle senior market analyst. The so-called apex formation emerged as the gap narrowed between highs and lows and is setting the market up for a rapid, powerful move, he said.

The price may jump as much as 19 percent to 27 cents by Nov. 30, if the most-active contract closes above 24 cents for two straight sessions, Kopp said. There is an equal chance of a 12 percent fall to 20 cents, the lowest since Aug. 7, he said.

“An outside fundamental news story” will decide which way prices move, Kopp said. Until then, investors should be wary as the market “pinches into an area that would be explosive,” he said.

On Nov. 10, sugar fell below a rising trendline connecting the lows on Oct. 9 and Oct. 28. The next day, prices recovered back into the narrowing channel. The upper margin of the channel connects the highs on Sept. 30, Oct. 19 and Nov. 5.

Sugar has surged 92 percent this year as India, the world’s largest consumer, imported supplies to cover a production deficit. Excess rain has limited sugar output in Brazil, the biggest producer, compounding the strain on global resources. Yesterday, raw-sugar futures for March delivery advanced 0.02 cent to 22.69 cents a pound on ICE Futures U.S. in New York.

Technical analysts study price charts and other data to forecast market changes.

To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.

Last Updated: November 13, 2009 00:00 EST

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