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By Cynthia Kase

The market’s been watching the impact of El Niño since June. Then the National Oceanic and Atmospheric Administration said there was a 90 percent chance the baby would stick around all summer, and maybe even into 2016. Sugar has been rising since mid-August, as El Niño persisted, but turned choppy in October only to break to 15.53¢ as of the 3^rd.

Apparently Niño’s wet weather is delaying the sugar harvest and fears have grown about undersupply. The technicals have been positive but slammed up against resistance at 15.53¢. So while it’s too soon to say if 15.53¢ is “it”, there is likely more downside.

15.53¢ is important for a few reasons. It failed by 5 points to reach the 21 percent retracement of the entire move down from 36.08¢ to 10.13¢ on the continuation chart. Second, the Stochastic and RSI momentum indicators were set up for bearish divergences at that price. Most important, 15.53¢ was a confluent target, as shown in the chart. That price is just 0.01 points shy of March’s “trend terminus” target (12.55^3/11.28^2) for the first wave up from 11.28¢.

First support was met on Wednesday at 14.64¢. Next is 14.40¢, just 7 points below Thursday’s low. This is the 21 percent retracement for continuation’s entire move up, and a confluent retracement for the intermediate swings on both charts. It is also the 0.62 projection for the wave 15.53 – 14.47 – 15.05.

The key question is whether the decline, which only reached 15.47¢ versus 15.40¢ support, is over. The fact that the bounce up from 15.47¢ formed an ABC pattern where C is the 1.62 extension of A, exactly, and that prices then declined to 14.59¢, that is, below the prior 14.64¢ swing, means probably not.

14.40¢ remains to be broken, so a continued decline is not a sure thing, but 14¢, the major threshold, is likely.

The open and midpoints of candlesticks constitute support and resistance. Last week’s midpoint was 14.37¢ and the open for the week ending October 9, the last large up week prior, was 13.92¢. There’s also an important swing at 13.94¢. So as long as this holds (the lower end of a 14¢ +/- 0.1¢ range), odds are open for the bull market to resume.

Initial resistance is 15.40¢. The decline isn’t dead unless this is overcome. Above this, a highly confluent 15.95¢, the last remaining target (the Phi^3 corrective projection) for the first wave up, and occurs as a target 10 times for the 10 waves up from mid-October’s 13.69¢ swing low. The highest price to which the March chart projects which has a moderate probability is 18¢, the 0.62 projection of the entire move up.

Send questions to askkase@kaseco.com, and click the link learn more about Cynthia Kase’s latest video series, Kase on Technical Analysis.

by Cynthia Kase

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“Ask Kase” and your question may be chosen as the subject of a future column (askkase@kaseco.com).

With VW cheating on diesel fuel emissions and standards being scrutinized worldwide, interest in electric vehicles may increase longer-term, and medium-term, gasoline fueled vehicles might pick up. But will gasoline prices get a boost any time soon? Probably not.

December gasoline, which becomes prompt in two days, traded up to $1.4604 at the end of August. Since then it’s been caught in a downward oscillating pattern, but remains above its earlier $1.1756 low.

Odds favor the downside. This was a large down month which prevented a bullish reversal pattern from completing. On the daily chart, the decline to and bounce up from $1.1756 was a bullish V-bottom but failed. The decline from $1.4604 was interrupted by a bullish flag which has since broken lower. The perpetual has been steadily dropping since mid-June, only going into a sideways stall during the past two weeks.

Odds of a recovery are higher than for a normal trending market. The decline from $1.4604 only met the minimum 0.62 extension. The decline has also been shallow.

Two very strong layers of support are $1.235 and $1.205, respectively the 78 percent and 89 percent retracements of the $1.1756 to $1.4604 rise. $1.235, less than one cent above the perpetual’s January low, is important because it’s only generated by the waves down from $1.4604. For the six waves down from this price, $1.235 is a wave extension for five, and as a corrective projection for three. Thus, should $1.235 hold, there is no connection to larger, earlier waves which project to lower levels. The next layer at $120.5 connects back to the mid July $1.5828 high. This support level could engender a trading range between the $1.20s and $1.50s, so watch out for that.

Even though the previous low of $1.1756 is natural support, a close below $1.205 could trigger a steep decline down to $1.06. This is because the wave extensions tie the two prices together. The wave 158.28 – 117.56 – 146.04 targets $1.205 as the 0.62 extension and $1.06 as the equal, 1.0, extension. 140.46 – 130.04 – 133.73 targets $1.205 as the 1.38 extension and $1.06 as the 2*1.38 extension. The point is that should there be a close below $1.205, the pull from $1.06 grows.

Adding to that pull is that $1.06 is the 89 percent retracement of the move up from the 2008 low of $0.785 to 3.48. Hitting $1.06 could cause a slide below the $1.00 level.

So watch to see if the two targets in the $1.20s hold – or not.

A close over $1.375 would argue for concern that the move up from $1.1756 will extend. That’s the price above which I wouldn’t hold short-term short position. Above $1.4604 the contract is in for a further recovery. Either way, moderate prices, well below prices should prevail. So fill up the tank, and get on the road before December snows slow you down!

Send questions for next week to askkase@kaseco.com, and click the link to learn more about Cynthia Kase’s latest video series, Kase on Technical Analysis.

By Cynthia A. Kase

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As a fledgling oil trader over 32 years ago, the one exchange with which I was familiar was NYMEX, now part of CME Group. So I’m always interested in how the exchange is doing. With erratic swings in equity, fixed income, and FOREX markets, some think investors will increasingly use the CME to manage risk and take advantage of bear markets.

CME Outlook

Let’s see what the charts have to say about this transaction volume, as opposed to price driven, market.

As August closed, CME had hit $95, retracing 62 percent of the decline from $100.87 to $84.33. Tuesday, CME made a $94.92 high, closing just 10 cents below that – the highest close since $84.33.

Will the current modest recovery hold below its 62 percent retracement, or continue higher? The call is not clear, but my bias is higher with the proviso that CME must close and remain over $95.2 soon.

CME Technical Analysis

Here are the technical reasons:

The trend terminus (Y³/X²) for the first wave down, 100.87 – 95.01 – 98.661, calculated to $84.30. $84.33 was hit, fulfilling the target almost exactly.
The market gapped down on the August 24 open, before meeting $84.33. This could be an exhaustion gap.
The daily candlestick for August 24 was a bullish “hammer”.
Together with the prior day, August 21, the hammer comprised a “morning star” setup, completed by a close over the August 21 midpoint.
The low on August 24 generated an oversold signal.
Every downside test generated by small down gaps has failed.
Tuesday importantly closed over the midpoint of the very bearish week ending August 21.

The reason $95.2 is critical, in addition to being just over the 62 percent retracement, and the midpoint for the bearish week, is that it is structural resistance and previously support as shown on the chart. $95 is also the critical daily Kase DevStop3. So, a close over will mean, per statistical testing, odds for a close over $100 are 70 percent.

The next threshold is $97.5, confluent for the wave 84.33 – 95.00 – 90.68, as the 0.62 extension and Phi corrective projection. It is a key target for the smaller waves following, and the open of the big down week noted above. Once $97.5 is hit, a trading range could ensue, but it would not be surprising to see $100.87 tested, and even new post-recession highs made. If I were short, I’d certainly scale out on closes in the $95.2 to $97.5 range.

Recommended CME Trading

The big bearish factor is that $95 has not yet been overcome. If I were long, I’d begin to lighten up at $90, and become more aggressive below $86 and out by. Playing from the short side, I’d be emboldened below $90, and looking for confirmation at $86.5 and $82.6. The “settlement” on CME isn’t in yet, but odds are leaning towards some moderation to the upside. For the CME no “exchange” just yet.

By Cynthia Kase

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“Ask Kase” and your question may be chosen as the subject of a future column (askkase@kaseco.com).

The media sector has been hit by fears about streaming video and unbundling. Disney reported decent revenues, but is trading at a relatively high multiple. With high hopes that Star Wars will boost Disney’s stock price, is the decline now a time to buy in?

Disney climbed from a $15.14 low back in 2009 to a $122.08 high on August 4, only to suffer an $11 plus down gap on the following day’s open. This precipitous drop, continuing to $104.24, disconnected the following price action from the previous uptrend. Though the dropped seemed large, it only retraced 38 percent of the rise from $78.54.

Aside from waves, the only key pattern is an intraday coil, shown in the chart below (dark red). Though coils are signs of uncertainty, this one appears to be a failed attempt to recover. The last wave up in green would be expected to exceed the earlier one, which did not happen

$0.75 Kase Bar with Coil

If there’s a break higher, though, I’d buy above $111 and increase my position above $117.9. Otherwise, I’d watch $100. If it doesn’t break, then I would time in on signals as prices rise from a short-lived downside test. I would buy on a bounce up from $93.4. But if this lower “drop dead” support breaks, I’d watch Fantasia instead of DIS for now.

Here are the details. As the coil’s apex is approached, a breakout is expected, with upside and downside targets $117.9 and $97.8 respectively.

The decline stalled before hitting its 21 percent retracement, $100. This is a hugely important price because it is the first retracement of the entire move up.

Retracements to $122.08

$100 is also a key extension for the waves marked in magenta in the chart. The wave from $122.08 extends to $100 as its 0.62 projection, and the Phi corrective projection. The 1.62 extension for this wave is $93.4.

The magenta wave down from $111 extends to $100 as its 1.38 projection. The last small wave from $109.28 targets $100 as its 2*1.38 extension. (For more on wave targets, check out Kase on Technical Analysis).

The waves shown in blue calculate to immediate support at $101.5. This is also Kase DevStop3 on the weekly chart. If this level isn’t broken on a move lower, then the tone will improve. It’s likely though, if this is tested, $100 will be met. $100 is also a psychological barrier.

Below $100, there’s a wave projection to $97.6, the coil’s lower target, but a break of $100 will likely lead to the $93.4 confluence point.

On the upside, the recent $111 swing poses initial resistance both structurally and as a wave target. Above this there’s a confluence point at $114.9, but the big number is $117.9, coincident with the coil’s upper target. Above this, a resumption of the uptrend would be expected, with reasonably confluent targets up to about $133.

Send questions for next week to askkase@kaseco.com, and learn more about Kase’s services please visit here.

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by Cynthia Kase

“Ask Kase” any question you may have about any actively traded security, and your question may be chosen as the subject of a future column (askkase@kaseco.com).

This week’s question for Kase: Is the Shanghai Composite Headed to Shangri-La? Continue reading Ask Kase: How To Trade The Shanghai Index

Is the “Baby’s” Sugar High Over?

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