Blue Line Breakfast Report - Sugar Cocoa Coffee OJ - January 19

Blue Line Breakfast Report - Sugar Cocoa Coffee OJ - January 19

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General Market Commentary

With the Phase 1 deal now in the rearview mirror and a mixed reaction in the markets, there have been a lot of concerns if China can actually live up to the commitments. I believe this is where President Trump tries to improve trade relations with the European Union and help broker the Brexit deal therefore lifting global growth estimates for 2020 and bringing China with it. The risk on sentiment in the equity markets and the Fed left sitting on their hands we should continue to see capital inflows into certain softs, energies and PGMs.

Cocoa

Trailing Palladium by 7%, cocoa futures are sitting as the 2nd best commodity out of the basket of 48, up 10.2% on the year. With disappointing North American and European grinding numbers, the market now focuses on dry weather conditions in the Ivory Coast and Ghana where more than half the world's cocoa production comes from.

Trading Perspective

If you were able to get long on January 10th on a V shaped breakout at 2588, be sure to trail stops and perhaps consider using a close below today's low as your risk parameters. Support is at 2635 and the sell trigger is way down at 2550. This is my favorite chart of the year and should be printed out and taped to your wall of ideal technical setups.

Sugar


The 3rd best performing commodity of the year out of the basket of 48 we actively monitor at Blue Line Futures. The 7.75% performance has been mainly due to the positive supply outlook while expectations for a global production deficit continue to expand beyond the 6-million-ton mark. I have seen new projections with the high end of the range at 9 million tons. There was an article posted on The Economic Times over the weekend indicating Indias October 1 to January 15 sugar output down 26% y/y: ISMA. With India being the largest sugar producer we could just be seeing this bull camp get going.

Trading Perspective

The breakout buy signal was on January 6th at 13.73 for March sugar and your first area of support is 14.25 and sell stop triggers down at 13.30. With ADX strengthening, stochastics in overbought territory and DMI+- widening out, it might be time to tighten up the stops and protect the equity in the trade while a breakout over 14.60 would refuel the fire behind this market.

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Orange Juice

Trading Perspective

Down 4.26% on the year and 6th worst performing commodity, trend traders were triggered into shorts back on January 13, at 95.60 for the March contract. While this downward trend might feel like it has been going on for months many traders have to ask themselves, how much farther can it go? I looked back at the weekly and saw the likely target would be from May 2019 down at 90 even. Resistance is up at 96.65 and buy triggers are at 98.65.

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Coffee

The 2nd worst performing commodity of the year out of the basket of 48, down over 13.69% on the year. Coffee is trailing the VIX down 14.19% and we could see a flip at any point in time. From a traders perspective, this market has neither triggered a long or short and is still neutral, as a sell trigger would occur with a break below 110.50 or a buy over 128.50. While I do not expect a move back over 128 anytime soon, it feels like liquidations will continue driving the market back down to 105. Options may be the best way to tackle this monster for the time being if you are going to counter trend trade otherwise ride this wave lower.


Good luck and good trading,


Phillip Streible

Chief Market Strategist

312-858-7303

Phil@Bluelinefutures.com

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures; LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results