Is Sugar Ready For A Rebound?

It seems like commodity trading has been difficult lately due to the volatility of the markets. Just take a look at December Corn. Yesterday Corn was up 18 cents to a contract high of 291. Today, as of this writing, December Corn is down 13 cents. To put this in dollar terms, yesterday December Corn went up by $900. So far today, December Corn is down $650. (A one cent move in Corn equals $50).

For prospective markets to trade I generally like to look at markets that are fairly quiet and are setting up to make a big move. Right now, it looks as if March 2007 Sugar is such a market.

If you’ve been following the Sugar market at all, you know that Sugar has been making some big moves in the past year. From April of 2005 through January of 2006, Sugar soared from 8 cents a pound all the way up to 19.73 cents per pound. The value of this move in a futures contract would have been a move worth $13,137. Since the end of January 2006, Sugar has moved back down to 9.70 cents a pound. Now it looks as if Sugar may finally be forming a bottom.

March Sugar is in the process of forming a bottom formation. March Sugar’s contract low is 10.66 cents made on October 4, 2006. So, I’ll be looking for a 1-2-3 Bottom formation to finish shaping up. Then, I would be prepared to buy a March Sugar Call if sugar rises past the Number two point.

An additional confirmation I would want to see happen before I actually entered a trade would be a confirmation of an uptrend using either United States Chart Company’s Trend Seeker ranking or TOVI’s Trend Seeker ranking. If either of these indicators show an uptrend AND price move past the Number Two point, then I would enter the market with a call option. Right now, I’m looking at a March 13.00 Call as an option that would fit my budget and an option that could very well be profitable if this rebound in Sugar does take place. Based on the 50% rule, sugar could move to around 14 cents before the option expires in February.

So, I’ll just have to keep watching to see if this trade develops. For more information on learning the basics of trading commodity futures and options, please visit my website, MyLearn2Trade.com.