The Sugar No 11 contract, the benchmark for raw sugar futures traded on the Intercontinental Exchange (ICE), closed at 19.71 cents a pound on Thursday. Sugar 11 contract has been on a long-term uptrend after bottoming out in early 2004 at a low of 5.27 cents. As long as it trades above its crucial long-term trend deciding level at 17 cents, its primary trend remains up.

The Sugar No 11 contract has significant long-term resistance in the band between 26 cents and 27 cents. A conclusive rally above this band is required to take sugar contract higher to 32 cents and to 34 cents in the long-term horizon. But failure to rally above the aforesaid band will confine the contract to trade in a broad range between 19 cents and 27 cents.

A decline below its long-term support between 19 cents and 20.5 cents will drag the contract to the trend deciding level of 17 cents. A fall below 17 cents will mitigate the uptrend and pull down the contract to 15 cents or 14 cents. The Sugar No.11 contract has been on an intermediate-term downtrend since its February 2011 peak of 36 cents. However, its significant long-term support in the band between 19 cents and 20.5 cents is providing a base. In early July, the contract took support and rebounded. However, it failed to rally above 24 cents and the contract is once again testing the 19 cents and 20.5 cents support band. Its daily indicators are displaying positive divergence implying a potential trend reversal. A rally from the support will encounter resistance at 22 cents and then at 24 cents. A strong rally above 24 cents will accelerate the contract to 26 cents in the medium-term. Next important resistances are at 27 cents and 29 cents.

Nevertheless, a fall below 19 cents will reinforce the contract’s intermediate-term downtrend and drag the contract down to 17 cents.

(This article was published on September 14, 2012)
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