Last week the Capesize Index was leaning towards a bearish technical from a momentum perspective, which was overbought whilst at the bear trend line. We noted that a close above US$5,582 was need to have bullish implications for the Capesize index. This has resulted in a rally of US$1,200 to US$6,715 and we have now broken the first of three technical resistance levels. We continue to see resistance at US$7,145 and US$8,374 as these were previous points of resistance.
Longer term momentum is now flattening out, whilst shorter period is forming a small bearish divergence which highlights the key importance of the resistance levels, and a possible upside rejection going forward.
As always the price is the lead indicator, and a close above the second resistance (US$8,374) would override the bearish momentum indicators.
Key support is at US$5,302 at this point, and a close below here will signal technical entry from the sell side for conservative traders. More aggressive traders may look to enter the market on upside rejection from resistance levels highlighted.
Last week’s note drew a lot of emphasis to the possibility that we could see bullish divergences form in both the October and Q4 futures, especially for the Q4 futures, which were at the major resistance for 2016. We also highlighted the risk of a bearish breakout ‘as from a technical perspective you could be selling into a market bottom.’
This has been the case, and bullish divergences formed on both futures contracts with technical buy signals activated on both. October futures, having activated break out levels at US$8,430 are now at US$9,700; having broken highs from the 30-6-16 at US$9,450 on the intraday trading. A close above this US$9,450 is again technically bullish, with new resistance levels at US$9,690, US$9,790 and US$9,889.
A close below US$9,000 is needed to activate technical sells, though preference below US$8,923 as this is the 61.8% retracement.
The Bullish divergence that formed in the Q4 FFA futures also resulted in a technical breakout above the US$8,607 level, with the futures now at US$9400. Longer term momentum us now turning up, but remains in negative territory. Price however is now above the Bollinger band as the market is trending. Key resistance sits at US$9,651, as this the high from the 30-6-16; a close above here would then put the recent market high of US$10,270 in the sights of the bulls.
Q4 support should be found on what was the previous bear trend at US$8,500, and a close below this level is needed to be considered technically bearish.
As mentioned last week the trend support in the Panamax index has now been broken. Longer term Momentum remains bearish (if not a little oversold) and the shorter period stochastic is oversold but in a trending environment.
A close in the Index above the trend resistance at US$5,575 is need to be regarded as technically bullish again. US$5,347 remains a support, however the recent trend break could signal a break in the neckline for a head and shoulder formation. If this is the case the initial downside price projection would be US$4,518, followed by US$4,217 and finally a 100% move would complete the formation at US$3,100.
Note a close back above the rising neckline would negate the price pattern and render it obsolete.
Having broken the US$6,500 level in the October futures, we now find ourselves back at these levels having traded down to US$6,300. With the index being oversold in the short term there will be a lot of focus on the US$6,500 level. We are already above this level on the intraday trading, a close above here would once again put the US$6,802 resistance level in focus. Short term momentum suggests we could try the upside again, especially as we are once again back above the short period moving average.
Cal 17 futures continues to show a small bullish divergence and prices are once again testing resistance level. Current bid price is US$5,750 and back above the trend resistance, and if we hold here then that would be regarded as technically bullish.
Longer term momentum does remain bearish, however the %K is now looking oversold suggesting existing shorts should be cautious. A close below US$5,671 would have bearish implications going forward.
Longer term momentum in the weekly Supramax index continues to be bullish, however the %K (the faster of the two lines) is turning suggesting we should see some form of pullback. The daily chart is finding resistance at the previous trend support at US$7,700, with technical support at US$6,680. A close outside of this range will lead the directional bias of the market.
As mentioned last week, we expected the technical support to be tested in the October futures, and this has been the case. US$7,200 is broken, but only just, and technical sellers would need to see more before entering into the market. Short term momentum is oversold suggesting caution to the downside here.
Cal 17 futures remain in trend and we are now seeing a bullish divergence. Shorts should be cautious of entering into the market on any trend break to the downside here as they are likely to be whipsawed.
Source: Freight Investor ServicesPrevious Next