12-04-2017

Capesize Market Still on Bullish Mode for the Long Term, Despite Recent Drop

FIS

The technical pullback in the Capesize index is now in play with a 15% drop last week. Support and resistance remaining the same as we have not reached our first downside target of US$ 13,643 yet. The stochastic is now showing a bearish cross and this would suggest that the index has more potential downside at this point. We are also seeing a drop in open interest suggesting market longs are starting to exit on higher volume. Any rejection of the downside support at US$ 13,643 – US$ 13,176 would have potential bullish connotations going forward. Technically the trend remains bullish within a long term range.

Capesize May 17 Daily
Support – 15,723, 14,420, 13,790
Resistance– 17, 100, 17,330, 17,550
Quick note on April, weakening momentum has now put the futures back onto support levels which continue to hold. The longer term trend remains bullish on the May futures as we continue to make higher highs and higher lows. Technical resistance is between US$ 17,100 – US$ 17,550, a rejection of this level would suggest a pullback to the US$ 15,723 support, with secondary support at US$ 14,420. Note the stochastic is failing to make new highs in line with price creating a bearish divergence. Not a sell signal, however it will become relevant on any pullback from the resistance levels mentioned. Caution on a close below US$ 14,420.

Capesize Cal 18 Daily
Support – 13, 660, 13,075, 12,350
Resistance – 15,370, 16,535, 16,700
Last week we noted that momentum was weakening, however we remained in a bull trend and it was not yet a sell. Sideways action resulted in a breakout to the upside resulting in fresh market highs, keeping the trend momentum bullish. Technical resistance is between US$ 15,370 – 16,700 with the first resistance being the range resistance between June – July 2015. A close above this level is likely to push the Cal 18 up to the tertiary resistance at US$ 16,700. Market sellers should remain on the side-line as the trend remains bullish. A close below US$ 13,660 is needed to break the upward trend cycle (or a lower high) and until this happens we remain technically in a buyers’ market.

Capesize Q2 V Cal 18 Daily
Support – 607, 370, 159
Resistance-1,506, 2,331, 2,862
Last week we noted weakening momentum in a bullish trend, with US$ 370 being a key level for buyers. Technically the Q2 v Cal 18 spread remains in bullish territory as it has remained above US$ 370 (low US$ 607) before rallying to US$ 1,488. The stochastic is now showing a bullish cross and at 44 has room to the upside. This would suggest that we have the potential to test recent highs in the near term at US$ 2,331. Technical sellers need to see a close below the US$ 607 before looking to enter from the sell side as the technical remain bullish, or a failure below recent market highs.
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Source: Freight Investor Services (FIS)

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