Sugar gave us a swing high on the 24th and closed well below the 10 DMA on Friday. I was hesitant to take this trade at the time as not many shorting opportunities have presented themselves in 2021, commodities have been increasing in value ignoring all seasonal and historical price tendencies. I believe rising bond yields will put an end to that, at least temporarily.
Moore's has a May sugar short trade on 3/3 that has been profitable 13 of the last 15 years.
This coincides well with seasonal data as we are right in the time of year that has not faired well for sugar prices.
Sugar sentiment hit 81 this past month, that is the highest sentiment has been for sugar since 2009 and a clear indication price is bound for a correction. Comparing sugar sentiment to a sugar chart over the past 10 years you can see high sentiment coincides well with large price corrections. At no point in the chart below has sentiment been as high as it is now.
We will be looking to enter May sugar at it's current price of 1645. The sugar market opens at 3:30 AM ET so we will set limit orders to execute at open. Our price target will be the 2020 high of 1464. Each tick movement in sugar is worth $11.20, a drop from 1645 to 1464 would be worth $2,027. We will place stops above the Thursday high at 1737 risking $1,030. That is a 2:1 risk reward ratio. Margins for sugar are currently $1,109 per contract on RJObrien.
Recommended entry or exit prices may not necessarily be reflected on the track record. Markets can change quickly resulting in stops being moved or profit levels changed based on new information. Brokerage customers are the recipients of these potential price adjustments made after initial recommendations.