A Sweet Report
by Vikrant Goyal
Sugar prices are moving up after a lull of a quarter-century. Will history repeat itself? Since 1966, global sugar prices have seen two major boom-bust cycles (Figure 1). Remarkably, both cycles seemed to echo each other in terms of the time taken for each rise and fall; this can be seen in Figure 2, where the two cycles are superimposed on each other.
Figure 1: NYBOT sugar. Will history repeat itself? That remains to be seen.
Even more remarkable is that the current upmove in sugar seems to be following the pattern of the earlier two cycles. In Figure 3, the percentage moves and time taken for each phase of the boom periods of all three cycles (1972-76, 1978-82, and 2004-present) are displayed. Clearly, both earlier cycles had similar first acts, and the same thing seems to be happening this time around. The eventual fall, still in the distant future, will be the second act, of course.
HOW FAR CAN THE CURRENT CORRECTION GO?
Figure 2: Sugar moves in three different rallies. Both cycles seem to have panned out similarly in terms of the time taken for each rise and fall.
Figure 3: Analysis of all three cycles. Here you see the percentage moves and time taken for each phase of the boom periods of all the cycles.
In the earlier cycles, corrections in February and March saw prices fall an average of 31% from the top or 45% of the entire first upsurge. A similar correction this time can bring prices down toward 12.50-13.50 cents a pound.
That said, since 12.0 cents a pound was a breakout level earlier in the current upmove, a correction down to that level now could provide a good buying opportunity.
Figure 4: How far can the correction go? Here you see the February-March corrections of all the previous cycles.
Vikrant Goyal is a currency analyst for Kshitij.com and may be reached via email at Vikrant@Kshitij.com.- www.kshitij.com
- Nybot
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Originally published in the June 2006 issue of Technical Analysis
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