08-02-2017

Dry Bulk: Panamax Freight Rates for Q2 a mixed bag

FIS

The Panamax Q2 17 futures is now reaching the upper end of its channel resistance within a bullish trend. The RSI continues to make new highs with the futures as it enter into overbought territory at 75. However it is worth noting that there is a longer term bearish divergence forming dating back to December which would imply that market longs should show caution at this point.

A close below the recent low of US$ 7,953 would make a fresh low and be a warning of a weakening trend. However we are making fresh highs, so any break in support would need to be followed by a lower low to signify a weakening trend. Technical resistance can be found at US$ 8,871 and US$ 9,095.

A rejection of either of these levels should have market longs looking to tighten risk. A close below the US$ 7,953 could see a market pullback to the lower channel support at US$ 7,633, with further support at US$ 7,350. Technically bullish a correction with a trend is due. A lower low followed by a lower high could suggest a more sustained correction, however at this point we target no lower than the lower channel support at US$ 7,633 as we are currently making fresh highs.

The spread between the Q2 17 futures and the Panamax index is making higher highs and higher lows, this is technically a bullish trending condition. With the RSI at 73 and starting to enter overbought territory, it is failing to make new highs in conjunction with the spread. This is known as a bearish divergence, and although not a sell signal would suggest that upside momentum is starting to weaken.

Technical resistance can be found at US$ 1,561 and US$ 2,100.

The first resistance represents the range that formed between April and October 2016, A rejection of this level would suggest a corrective phase could be about to begin. A close above US$ 1,561 would suggest another upside push to the US$ 2,100 level which we would expect to hold if tested.

A close below US$ 854 would be below the recent low and indicate a shorter term downward move with the next logical target being the low on the 13-1-17 at US$ -1,018. A close below here could push the spread to as low as US$ -2193. Technically still bullish there are signs that we could enter a corrective phase soon.

Source: Freight Investors Service (FIS)

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