[Unlocked] Sugar Comes Off Its Short-Term High

Here's Sugar, which has built a very constructive base over the last 2.5-years or so and is now trying to accelerate higher. Unfortunately, it looks like this attempt is going to be a failed breakout by closing back below its 2017-2018 highs near and 38.2% Fibonacci Retracement of its 2016-2018 decline near 15.20.

Click on chart to enlarge view.

While that suggests some near-term backing and filling towards 13.50 is likely, there are a lot of positives about this chart from a structural perspective. First off, we talk a lot about "the bigger in base, the higher in space" tendency of markets...and this is a big base.

This long-term bottom has been a process and to think that the demand that's driving it is going to dry up and it'll fall apart overnight is the lower-probability outcome in our opinion.

Additionally, momentum has managed to stay overbought for the last 1.5-years which shows that sellers have been unable to take control of the trend. What's also not shown on the trend is commercial hedger net short positioning which is approaching its highest levels since early 2017.

Not that extreme from a long-term perspective, but definitely elevated and a risk in the near-term.

Overall, the risk in Sugar is to the downside in the near-term. If prices are below 15.20 then we'd expect some backing and filling towards support at 13.50, which would represent a roughly 10% decline. With that said, longer-term this is one of the more constructive bases out there in the Commodity space, much like Wheat, so we'd keep it on your radar if you're a longer-term market participant looking to catch the next major trend.

Thanks for reading and please let us know if you have any questions!

Allstarcharts Team