Sugar Futures, USDX Futures 2012-05-26
Here we will observe sugar futures and USDX futures. The sugar observation we will look at are a continuation of a trade I have been looking for during that past couple of weeks. The US Dollar index observation is just a small time trade I might make at early next week, depending on how the markets open after Memorial day.
Let us first observe the futures chart for October sugar. First, we will look at a trading chart in the daily time frame, second we will see the 60 minute version of the same futures product. Below is the daily chart for the October sugar futures contract.
Firstly, I want to point out that we are seeing a very nice price to MACD divergence forming. Prices have hit new lows below the 20.50 lows of the previous week. Meanwhile, MACD continues to steadily incline in both the moving averages and the histogram. This situation is looking very ripe for a trade. I am excited about this, although I have managed to contain my excitement and not entered prematurely.
Let us now look at a close up of sugar futures prices on the 60 minute chart.
We saw somewhat of a bottoming action where the yellow arrow points, but I just wasn't satisfied with it. Had I entered, I'd probably still be profitable, but somehow I still think we might see a touch down to the lower ranges of recent price activity. At this point I am looking for any penetration into the green circle area. I don't know if I will wait for an actual MACD divergence type situation here, I might find myself entering at the first chance I get if prices move anywhere near their recent low to 19.80.
Let us now look at another futures product, USDX futures. Below is a 60 minute chart for June US Dollar index futures.
What we are seeing here is almost an exact replica of my last trade on Thursday night. You can see the blog entry as it is the previous one to this blog entry in the column on the right hand side of this page. An ongoing MACD divergence has been forming here and as prices make equal or slightly higher tops, MACD continues to decline. This means that anytime prices get up into that higher range (in and around 82.50) they are likely to drop down to the moving average. This could also be played using the swing trading strategy by buying on the moving average (yellow line) and selling near the upper channel line. However, since we are seeing this MACD divergence my bias is towards a break downwards (in the short term) before we see a break upwards, so I am hesitant to buy and leaning towards shorting. After all, we have stops to protect us if we are wrong. I expect it won't be long before we do see a break down to at least 82.00 and maybe a little lower. If I enter this trade short, I'll be prepared to take profits at the moving average. This is just a small short term "couple of hours" type trade. Although, I am keeping my eyes open for a larger top in the USDX on the daily charts.
I am bullish on sugar futures, and I am just looking for that perfect entry. We'll see how that goes. I will be using the October contract, because I want to be prepared for a longer upwards move if it occurs. The July contract might be cutting it a little short if I get lucky and that larger move does occur. I said last weekend that I thought I'd be entering this trade sometime this last week, but it didn't materialize for me. I'll say it again, I'll probably enter this trade next week
I am looking to a quick trade shorting the USDX when the market opens next week. I don't know if this will be Sunday evening or Monday evening, because we are having Memorial day on Monday. If I miss out on this trade, I won't be too worried. Sugar is my main priority right now.
On another point, I'm still keeping my eye on gold. I feel like I might be bullish there, but I also feel very hesitant to commit. The Australian dollar is also hanging around the back of my mind from a bullish perspective. But again, it is not my priority right now, and I'm hesitant to get into something like that until the USDX shows some signs of topping.
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