10-05-2017

Dry Bulk FFA: Capesize Index is starting to show signs of holding within the support zone

FIS

Capesize Index

Support – 10,862, 9,468, 6,570
Resistance – 13,772, 15,301, 19,602
Little has really changed on the index technical since last week. We noted that we were entering a support zone with the stochastic above 50, making this a dangerous area to enter a market short. Monday’s index was up nearly US$ 600 suggesting the downside momentum has started to slow. We have circled the candle as it is still very narrow. We maintain our view that market buyers need to see a bullish candlestick at these levels before entering from the buy side (strong upward move or downside rejection candle). Being a support zone this is a dangerous area to enter fresh shorts, market sellers need to see a lower high before entering from the sell side now, as this would be regarded as technically bearish.

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Capesize Q3 17 Daily

Support – 14,385, 13,770, 13,083
Resistance – 16,400, 16,753, 17,008
The Q3 Capesize futures continues to remain within its technical range. The lower high and higher low would suggest the range is turning into a symmetrical triangle formation. The symmetrical formation is neutral breakout pattern. Technically continuation patterns usually (not always) breakout in the direction of the trend, however the symmetrical triangle is unique as the upward sloping trend is counter balanced by the downward sloping trend. This pattern is bullish on a breakout to the upside, and bearish on a breakout to the downside. Conservative traders may wait for confirmation of a breakout before entering into the market, in the form of a pullback first. This helps avoid a false breakout. However being freight and not an equity this could result in the move being missed before a pullback appears due to the high volatility levels.

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Capesize v Panamax Q3 17 Spread

Support – 6,100, 5,600, 4,625
Resistance – 6,945, 7,275, 7,550
The Cape v Panamax Q3 17 spread remains in bullish territory. It continues to make higher highs and higher lows and remains above the 34 period EMA, and 50 period MA. The stochastic is above 70, overbought but in a trending environment, suggesting upside continuation. However, the stochastic is starting to lag, this is not yet a bearish divergence, but is suggesting upside momentum is starting to weaken. If we make a new high, then a bearish divergence will probably appear, and longs should be cautious. If we fail to make a new high it would signal that we could be entering into a corrective phase.

The technical is bullish, however the behaviour of the stochastic and the fact we are 26% away from the 50 period MA would suggest this is a dangerous place to enter fresh longs, as it has the potential to mean revert.

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Capesize Q3 v Cal 18 Daily

Support – 377, 238, (-47)
Resistance-1,270, 1,383, 1,637

The Capesize Q3 v Cal 18 spread held support last week resulting in a US$ 600 move to the upside. Technically this spread is still regarded as bearish due to the lower high and lower low. However an oversold stochastic, and the fact we held support leans to the bull argument, as does the fact we are trading back above point A. Technically still in consolidation, a close above point B at US$ 1,244 would be considered as technically bullish. A close below point C (and the support zone) would signal the bullish A, B, C pattern has failed, and market longs should look to tighten risk as it would signal downside continuation. Technically bearish but showing a bullish pattern, this needs to do more to convince it is ready for the next leg up.

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Source: Freight Investor Services (FIS)

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