From the July 01, 2011 issue of Futures Magazine • Subscribe!

Sugar pushing old highs

While most commodities were falling throughout May, sugar was one of the few to see a significant and prolonged rally. Oddly enough, it seems there are very few fundamental reasons to explain the recent upswing in sugar prices.

Shawn Hackett, president of Hackett Financial Advisors, says the recent price hikes are nothing more than a bounce that will go lower. “It is seasonally strong and just like clockworks it almost always rallies around this time of year. This is especially true this year considering the shellacking it had been taking,” he says. Hackett says the big factors to watch will be the Indian monsoon season and increased demand from Middle East holidays. He expects the current $0.26/lb to be firm resistance and expects prices to trend lower toward $0.20/lb.

Brian Booth, senior market strategist at Lind-Waldock, explains the recent move as a technical correction combined with exchange margin changes. Last year we saw sugar move from about $0.16/lb to $0.36/lb, a $0.20/lb move. Since the falloff earlier this year, price has now retraced about 50% of those gains. Booth says traders should watch as prices begin testing old highs and expects prices to head lower unless we see a new chart high with a close above old highs. He says the first point of resistance will be $0.2750/lb and sees support at $0.2250/lb.

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