Dry Bulk FFA: Capesize Market Reaching Resistance Levels


Longer term resistance in the capesize index can be found between US$ 18,353 and US$ 19,515 as these were the weekly highs from November 2016. Last week’s strong upward move has pushed the stochastic above 71 and is now entering overbought territory as we approach resistance levels. Technically there is potential to go higher, however resistance is expected to hold in the near term on the index. Open interest continues to increase, however a volume drop last week would imply that buyers are scaling back at these level. Technically the Capesize Index remain bullish, however as we approach resistance levels we could see a short term pullback from here. A close above the resistance level would imply upside continuation.

The April futures trend remains in bullish territory and currently entering a support zone between US$ 14,500 and US$ 13,500. This could attract short term buying interest at these levels due to Fibonacci support, and the previous swing high. Technical resistance can be found at the recent high of US$ 17,300, as this is the recent high from last week. Although we remain in bullish territory, we still have concerns regarding the 3 upward moves since February. This is heightened by the relationship between the first upward move and the last upward move. The 3rd wave up was exactly 161.8% (Phi) of the first. Caution on any upward moves that fail to make fresh highs from here as it could mean we are witnessing a potential retracement.

Capesize Cal 18 Daily

Last week’s momentum pullback resulted in a fresh high being created on the Cal 18 futures. We maintain the view from last week that the momentum pullback on the stochastic would suggest that we could be enter into a corrective formation in the short term. Momentum is now turning bearish, however at 84 it remains in a bullish trending environment. A close above US$ 13,600 would suggest another upward move and look to test the resistance at US$ 13,825. A close above hear would signal near term upside continuation Resistance is between US$ 13,600 and US 14,038. The bearish momentum cross, and last week’s bear trap would suggest that resistance levels should hold in the near term. However new highs would override the divergence. Support is at US$ 12,950, a close below this level would confirm that the corrective phase has begun and market longs should look to tighten risk.

Capesize Q2 V Cal 18

The Q2 V Cal 18 futures spread has started to pullback from its highs. Fibonacci support is at US$ 65 and US$ -278, a rejection of the support level would suggest another attempt at the recent highs of US$ 1,439. A close above this level would suggest bullish continuation. Any failure to make a new high going forward should have existing longs looking to tighten risk as it would suggest that we are entering a corrective phase. Targeting US$ -389 or lower. Technically the trend remains in bullish territory, however the recent corrective move has been greater in time and the pullback greater in depth. This would suggest that sellers are starting to become emboldened and imply technical resistance at higher levels could hold.

Panamax Index Weekly

Support continues to hold on the weekly chart after last week’s sell off. Technically the index remains in bullish territory as it is above key moving averages. Last week we noted the momentum pull back was greater than previous pullback. This would that the longer term technical is weakening. Momentum is at 44 and remains in an upward trajectory, but in bearish territory. The Panamax index remains in a potential bull trap based of the weakening momentum indicators. Having found support on the 20 period MA it would seem that the bull trap is still in play. We may have more to do on the upside first, however if the Index gets above US$ 9,803 it would form a bearish divergence with the stochastic suggesting market longs should be cautious.

Panamax April 17

The April contract has held at its second support level and momentum is now oversold. We noted last week that the stochastic pullback was making new lows whilst price was failing to do so, and this has longer term implications on the trend. The oversold stochastic would suggest that we could once again challenge and potentially make new highs. However, the momentum indicators would suggest that this is the last upward wave and we remain of the view that buyers should stick to a swing basis only. A close below US$ 9,687 would have bearish implications going forward. As would any rejection from the recent market highs.

Panamax Cal 18

The 34 period EMA support held and momentum is starting to show signs of moving out of oversold territory. Technically the next move should be up as momentum is turning and the average line has held, upside target in the near term should be the recent high of US$ 9,480, with further resistance at US$ 9,589. We maintain the view that buyers should be cautious if we make new highs as it will create a bearish divergence with the stochastic. Conversely, a rejection of the US$ 9,480 resistance would suggest that we could be entering into a corrective phase. A close below US$ 8,955 would be considered as bearish and market longs should look to tighten risk.

Panamax Q2 V Cal 18

The US$ 650 support mentioned last week on the Q2 v Cal 18 spread has held, and we are once again testing the highs. A bullish cross on the stochastic has formed supporting the current upward move from the recent resistant levels mentioned. A close above the current high of US$ 1,136 would form a bullish breakout from a technical perspective and should attract fresh buyers to the market. Any upside breakout would also create a bearish divergence with the stochastic. Not a sell signal it would suggest that fresh longs need to be cautious at these levels Sellers should hold off entering the market at this point as the stochastic would suggest higher levels before the divergence forms.
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Source: Freight Investor Services (FIS)

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