The Sugar futures market (ICE Futures US SB) looked quite bullish Thursday morning as SB gapped higher at the opening price, 11.88¢ per lb. - only a couple ticks below its intra day high of 11.92¢. From there SB started lower in intra-day trading finishing higher relative to the previous day's close, but lower relative to Thursday's open (what we call a 'fake rally'). SB closed the session at 11.81, and if history is a guide, SB could be heading even lower from here.
Q: How has sugar performed in the past when, while trading below its 50-day average between March and May, it 'gaps open higher’* only to settle with a 'fake rally' ** on the day?
* A gap open higher is when the days opening price is higher than the previous days high.
**A fake rally is when the close is higher relative to the previous days close but lower relative to the current days open resulting in a solid green bar on a Japanese candlestick chart.
A: According to the 25 previous occurrences of this event, omitting repeat occurrences within 10 trading days, ICE Futures US SB has shown a weak bearish edge that peaks 27 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Thursday, April 3, 2008) is Monday, May 12, 2008.
SB declines in 76% of the cases (19 of 25) by an average of 16.0% relative to the close on the event date. The average of the six rallies is 9.2%. The overall return of the 25 cases is -9.9%, which, based on the close on the event date (11.81¢), provides a target price of 10.64¢.
If you would like to see more details of this historical edge, go to www.markethistory.com
To view a close representation of this event in Eventedge, click here.
Ryan Soudan is an analyst with MarketHistory.com.
