I refer to my previous post of June 8.
I am buying today the tracker following the price of sugar, the iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (ticker: SGG) at a price of $43.2 on the NYSE for a total of $10,000.
Stop loss: $38.0
Friday, June 11, 2010
Tuesday, June 8, 2010
Sugar
Since the beginning of this year, sugar is the commodity that decreased the most in value. See the graphic below.
On the weekly chart below, we can see that the price of sugar decreased by about 45% from its high of 25 to its current level of 14.
Sugar prices fell on speculation that favorable growing conditions in Brazil, the world's largest sugar producer, will yield a record crop, thereby increasing supply on the markets.
Such decrease triggers my attention and tells me to start looking for a value buy. Sugar price cannot stay low for a prolonged period of time. Farmers looking to maximize their earnings will tend to plant less of crops fetching unattractive prices and more of those that have seen an increase in price.
An investment in sugar can be made by using the iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (ticker: SGG) listed on the New York Stock Exchange. SGG is an Exchange-Traded Note comprised of futures contracts on sugar.
The curve for sugar futures contracts traded on the NYMEX slopes slightly upward. This contango situation (contango happens when the price of the commodity for future delivery is higher than the spot price) may cause an investment in SGG to face some slight headwind as the costs to roll over the futures to the next month contract (known as "negative roll yield") may reduce somehow the return of the overall investment.
On the weekly chart below you can see that the price is currently lying on a strong support level and that the stochastics indicator is clearly oversold: two bullish signals.
On the daily chart below one can see a bullish divergence between the price and the MACD: that is a bullish signal.
Keep in mind though that SGG is a very volatile instrument.
On the weekly chart below, we can see that the price of sugar decreased by about 45% from its high of 25 to its current level of 14.
Sugar prices fell on speculation that favorable growing conditions in Brazil, the world's largest sugar producer, will yield a record crop, thereby increasing supply on the markets.
Such decrease triggers my attention and tells me to start looking for a value buy. Sugar price cannot stay low for a prolonged period of time. Farmers looking to maximize their earnings will tend to plant less of crops fetching unattractive prices and more of those that have seen an increase in price.
An investment in sugar can be made by using the iPath Dow Jones-UBS Sugar Total Return Sub-Index ETN (ticker: SGG) listed on the New York Stock Exchange. SGG is an Exchange-Traded Note comprised of futures contracts on sugar.
The curve for sugar futures contracts traded on the NYMEX slopes slightly upward. This contango situation (contango happens when the price of the commodity for future delivery is higher than the spot price) may cause an investment in SGG to face some slight headwind as the costs to roll over the futures to the next month contract (known as "negative roll yield") may reduce somehow the return of the overall investment.
On the weekly chart below you can see that the price is currently lying on a strong support level and that the stochastics indicator is clearly oversold: two bullish signals.
On the daily chart below one can see a bullish divergence between the price and the MACD: that is a bullish signal.
Keep in mind though that SGG is a very volatile instrument.
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