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****Update: This position was stopped out on Dec 13 in the morning, as the MACD divergence "broke". Entry was premature. I am looking for a re-entry here.****
Sugar prices futures have made new lows on the daily sugar futures trading chart of the current front month for sugar futures.
This has prompted me to take on a long position in sugar futures. My entry price was at 18.94 at 8:47 in the morning (my time). I am trading the July 2013 contract of sugar futures, but I am showing the March 2013 sugar charts.
Anyone who has been reading this futures blog knows that I have been of a bullish posture on world sugar prices for a while, but that I have been waiting for a decent entry opportunity. Today we have seen sugar trading push prices below their last lows.
Let us observe a daily futures chart for March 2013 sugar futures.
As of the time I took this screenshot (seconds after executing my trade), price has dropped another 0.10 or so. You can see that prices have pushed below their last low of 18.66. You can also see that MACD is rising and, as world sugar prices make new lows, MACD fails to do the same. The is an MACD divergence, and it is the entry sign I have been waiting for.
Let us go in for a closer look at the sugar prices caused by trading sugar futures on a 60 minute chart for the March 2013 contract.
Again, keep in mind that we are looking at the March 2013 contract, whilst I have placed my position on the July 2013 contract. They are running a 0.30 to 0.35 difference. I have done this in case of a prolonged move going through spring and into summer. Plus, volumes are high enough in the July contract now, that I feel comfortable trading that far out.
Also, keep in mind that since I took this screenshot (seconds after executing my trade), prices have dropped around 0.10 more. You can there is an MACD divergence here. Even with the price being 0.10 lower than is shown here, the MACD divergence holds true. After seeing the buy sign on the daily chart, this 60 minute chart trading signal was my cue to enter my position.
My scope for this trade is a little longer term. As always, I am using a stop loss order to minimize my exposure to losses. Even though I am hoping to hold this trade for longer than I normally would, I am not going to loosen up this stop too much because we are into new lows. New lows can sometimes slip away into dramatically new lows.
However, if this trade moves into profitable territory, then I will hold a relatively loose stop after my break-even point is passed. My scope for this trade is a little longer term. Long enough that I chose to trade the July 2013 contract, rather than the March or May 2013 contracts.
I am feeling a lot of potential upside in world sugar prices at this moment and for the first half of 2013. I feel that there is a lot of potential institutional buying that could take place very soon. Now, I feel it is a matter of just seeing it get triggered. Technical signals like MACD divergences are the cues that I need to look for to find the pivot points that indicate that fresh activity may be underway. As always, precautionary stops are a must. This is speculation, not science, and we make mistakes, misjudgments and premature decisions. (which when I think about, makes it exactly like the preliminary stages of science).
I am going to stay quite focused on watching sugar prices at the moment. I do have some other ideas for other markets, but I am not going to follow through with them at this time. At least, not while I am still in the early stages of this sugar trade. For example, natural gas looks pretty juicy at this moment for a long entry on the 60 minute charts.
As I said, until I am either stopped out or past my break-even point in sugar futures, I am going to concentrate fully in that trade.
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