Visions of sugar-plums danced in the heads of traders in the sugar futures market in New York as the market rallied in a gap move above 10.5¢ per pound on Monday, busting through that resistance level. What’s fueling the move? The market’s bullish condition has caused the RSI indicator to move above the 70 level, which, according to the textbook lore means that the market is 'overbought' and should decline. What does the actual history say about how Sugar reacts to this technical condition?
Q: How has the sugar market fared in the past when it has seen the RSI level higher than 70 in the month of December?
A: According to the 14 previous occurrences of this event, EventEdge indicates that New York Board of Trade (ICE Futures U.S.) sugar has shown a strong bullish edge that peaks 25 trading days after the event. Thus, the projected date for the peak of the bullish edge relative to the current event date (Friday, Dec. 14, 2007) is Wednesday, Jan. 23, 2008. Number 11 World sugar rallies in 86% of the cases (12 of 14) by an average of 26.5% relative to the close on the event date. The average of the two declines is -4.3%. The overall return of the 14 cases is 22.1%, which, based on the close on the event date (10.48¢), provides a target price of 12.8 ¢.
Now, note that this event date is Friday, so we're a day late here, but there's plenty of room to go here in the projected bullish move in sugar, according to history.
This Nitro-scanned trading idea can be seen and manipulated in our EventEdge® analysis tool by clicking here.
If you would like to see more details of this historical edge, go to www.markethistory.com Gibbons Burke is editor of MarketHistory.com.
