Holding large size of sugar long contracts turned out to be a bittersweet experience for me. I earned the most by locking in gains from the previous rallied sugar price and reopened another 5 same contracts in the hope to continually capture the momentum. However, with the weak performance of sugar over the past few days, there were huge sell offs as price down movement of a scale of more than 1 standard deviation was considered to be a momentum killer for bulls. I checked the 3-month sugar price quotes on Nasdap and observed that price was roughly 3 times higher now than the start of the September.
I believed the present price downward tendency was strong, which would engulf the previous up move. Besides, as I drew lessons from my past mistake on holding the losing contracts for too long and burdening with an even bigger loss, I’d rather take a quick action to close my position sooner to prevent further loss than wait and rest hope on my profit/loss turning to positive.
Meanwhile, unlike what I normally did before that went immediately to overweight an opposite position to hedge against my existing losing position, I think there could be reversal patterns so price maybe lining up with hedging pressure. As more and more hedgers took extreme shorting positions on sugar, the existing bear market might be coming to an end and price might bounce up and be sticky for a while. Hence, instead of rushing into taking an opposite position on the same commodity, I took a look at other commodity markets to diversify my portfolio.
Cotton price should be of some concerns to the bears. Price are trading below their 20 day moving average telling me that the short-term trend is to the downside as good weather in the southern part of the U.S. is promoting better harvest conditions binging in ample supplies. In addition, the continuing sharp up of U.S. dollar I believe will keep cotton price low, as there is a negative relationship. Therefore, I short 2 contracts of cotton Mar.
