A Second Shot at a Sweet Trade

From the Desk of Ian Culley @IanCulley

The New York Mercantile Exchange soft commodity contracts have been ripping.

Orange juice futures recently broke out of a decade-long base, coffee is up almost 20% in a month, and cocoa hit fresh 52-week highs yesterday.

Yet, of all the softs, I like sugar the most.

In fact, sugar held the No. 1 spot as my favorite chart heading into 2023. And it broke out last month!

I missed that move -- not for lack of initiative, more like access issues.

If you missed it, too, have no fear: Sugar is offering us another opportunity to get long.…

Check out the weekly chart:

Sugar futures broke out of a multi-year base in early 2021, climbing more than 30% over the following eight months. Since then it's consolidated within a tight range.

I can’t resist taking a shot at a continuation pattern following a big base breakout. These tend to be the sweetest trades. 

And that’s exactly how it’s played out so far… 

Here’s a look at the May sugar contract:

Sugar formed an inverse head-and-shoulders, completing the pattern last month and launching a breakout of the larger consolidation. 

I view the recent pullback as a hard retest, as price forms a potential bullish pennant at the neckline.

This is the fresh opportunity.

But you don’t want to jump the gun. It could easily break down here, invalidating last month’s upside resolution.

I like buying on strength above last week’s pivot high of 20.28. If and when it takes out that level, I’m long with a target at approximately 23.

To be clear, you don’t want to get long unless it’s above the Feb. 10 pivot highs.

That’s it for today.

What did I miss? Are you getting long sugar here?

Let us know what you think. We love hearing from you.

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