21-03-2018

Dry Bulk FFA: Panamax Market Still Bullish

Highlights:

An unchanged technical on the Panamax index after 5 days of sideways price actions. Market pullbacks that hold above the USD 11,958 support level would keep the technical in bullish territory on the daily chart.

The April futures remain technically bullish due to the higher high but has now formed a symmetrical triangle which is a technically neutral pattern. Technical breakout now needed in either direction.

The Q3 futures have created a lower low but also a bullish flag pattern. A stochastic at 19 would support this. Sellers need to see an EMA death cross preferably with the shorter EMA’s below the 55-period ma.

The Cal 19 futures remain on wave and have now formed a bullish flag pattern. A close below the lower channel support could push price down to the 55 period

Panamax Index Daily

Source: Bloomberg

Resistance – 13,740, 14,465, 17,315
Support – 11,958, 10,635, 9,925

Literally no change on the technical for the Panamax Index with 5 days of sideways price action.

The stochastic on the weekly chart at 59 remains in bullish territory whilst the daily stochastic remains near its maximum at 97 but in a trending environment.

Downside moves in the index that remain above the USD 11,958 support would keep the daily technical in bullish territory. However, downside moves below the USD 11,958 level would suggest the index has entered into a corrective phase as it would have created a fresh market low.

Technically bullish above USD 11,958 but in a consolidation phase.

Panamax April 18 daily

Source: Bloomberg

Resistance – 14,160, 14,210, 14,365
Support – 13,726, 13,653, 13,490

The April futures continue to remain in bullish territory having produced a higher high and higher low. However, price action itself appears to be consolidating in the form of a symmetrical triangle (like the one seen on the Brent futures last week).

Symmetrical triangles are neutral patterns due to the ascending and descending trendlines that are converging. Directional bias usually comes in the form of a breakout about 2/3rds of the way through the technical pattern.

Although a neutral pattern consolidation patterns often break in the direction of the longerterm trend. As highlighted last week we believe that the rolling front month futures are in a leg 4 corrective phase of an Elliott wave cycle; which if correct would indicate an upside breakout.

A close above the trend resistance at USD 14,160 would be considered as technically bullish and suggest we have entered leg 5 of the current Elliott Cycle. Likewise, a close below the USD 13,726 is considered a bearish with USD 13,653 needed for a fresh market low.

A technically neutral pattern but within a bullish trending environment. Breakout needed.

Panamax Q3 18 Daily

Source: Bloomberg

Resistance – 12,908, 12,970, 13,105
Support –12,908, 12,505, 12,320

The Q3 18 futures have made a lower low and this neutralizes the current bull move. Although a lower low is generally technically bearish, price action itself remains within the 8 – 21 period EMA’s, which remain above the 55 period MA. The averages are bullish, and this stops technical sellers from entering the market.

We highlighted last week that the sideways action would suggest that we are in a leg 4 corrective phase. From an Elliott wave perspective our view remains unchanged.

Where the April futures have produced a neutral symmetrical triangle pattern, the Q3 18 futures seem to be producing a bullish flag pattern (as marked on the chart).

Upside moves that close above the upper trend channel (currently USD 12,908) would be considered as technically bullish and suggest we are entering leg 5 of the current wave cycle.

To make a ne high we need to see price action above the USD 12,970 resistance. An over sold stochastic at 19 also supports the bull technical.

Downside moves need to create a death cross on the 8 – 21 period EMA’s. further support is at USD 12,139 in the form of the 55 period MA.

Panamax Cal 19 Daily

Source: Bloomberg

Resistance – 12,35612,405,12,490
Support – 12,081 11,974, 11,807, 11,640

Little changed on the Cal 19 technical from last week.

The trend remains bullish, the futures remain corrective within the bull trend. From a technical perspective we seem to be following the Q3 futures in the form of a bullish flag pattern with an oversold stochastic on a leg 4 correction.

Technically this market is bullish but needs to close above the USD 12,356 upper trend channel for confirmation of a leg 5 entry.

Price action that close below the USD 12,081 level would break the channel support, and this would indicate a more complex corrective phase.

A death cross (8 EMA crossing the 21 EMA) could push price action down to the USD 11,516 55 period MA. However from a technical perspective this would still be regarded as corrective as the EMA’s remain above the 55 period MA.

Source: Freight Investor Services (FIS)

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