The rally in raw-sugar futures is ending after prices jumped last month to a 29-year high, according to a technical analysis by James Cordier, a portfolio manager at OptionSellers.com.
A 5.4 percent decline last month, the first since May, created a “bear flag” pattern that may signal prices are headed lower, Cordier said. Sugar fell to 27.55 cents a pound yesterday on ICE Futures U.S. in New York, down from 33.39 cents on Nov. 11, the highest since January 1981.
“Sugar has lost its bull trend,” Cordier said by telephone from Tampa, Florida. A failure to top 29.3 cents this week will “confirm a bear flag,” sending March futures to 25.3 cents and then to 22.5 cents, he said.
A drop in open interest, a measure of futures contracts yet to be closed, liquidated or delivered, also signaled the end of the rally, Cordier said. Prices jumped 8 percent last week and still are up 17 percent since the end of September.
The bear flag pattern is signaled after a break occurs below a rising trading range.
In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.