05-05-2018

Dry Bulk FFA: Capesize Bullish But With a Catch

The Capesize index is technically bullish but has the potential to produce a bearish divergence on the 21 period RSI and the stochastic above USD 18,192. A close below USD 16,890 would create a lower signalling a corrective phase within a bullish trending environment.

The May futures remain technically bullish having created a fresh market high. However, like the index we are seeing a bearish divergence in the market indicating a potential weakening in upside momentum.

A mixed technical picture on the Q3 futures as price action is technically bullish, however, the EMA’s would indicate a neutral market. A close below USD 17,280 would indicate the index has entered a corrective phase, whilst a close above the 17,840 level would signal upside continuation.

The Cal 19 futures have entered a leg 4 corrective phase and formed a neutral symmetrical triangle. a breakout in either direction is now needed to signal the next directional move.

Capesize Index Daily

Source: Bloomberg

Resistance – 18,743, 21,512
Support – 16,890, 16,742, 14,374

Price action on the Capesice 5TC index remains in bullish territory and is now above the 200 period MA for the first time since Jan 15th, 2017 and this has recently acted as a market support.

Both the stochastic and the 21 period RSI are in overbought territory with the potential to produce bearish divergences if the index prints above USD 18,192. Although not a sell signal this is a warning that upside momentum is starting to slow down and increases the possibility of the index entering a corrective phase.

Fibonacci resistance is between USD 18,743 and USD 21,512 with technical support starting at the 200 period MA at USD 16,742 with further support at the 21 period EMA at USD 14,374.

A close on the index below the USD 16,890 would create a new low and indicate the technical has entered a corrective phase within a bullish trending environment.

Capesize May 18 Daily

Source: Bloomberg

Resistance –19,104, 19,877, 20,650
Support – 17,375, 16,640, 16,202

The overbought stochastic on the last report indicated that the May futures had entered overbought territory, not a sell signal but a warning that momentum could be slowing down.

The capsize had one final push before entering into a corrective phase, crucially however the market pullback held at the 8 period EMA keeping the technical in bullish territory and this has resulted in the May futures going on to make fresh market highs. Like the index we are now seeing a bearish divergence in the market with the stochastic, warning that upside momentum could be slowing down. Note this is not a sell signal.

Downside moves that close below USD 16,640 would create a fresh market low and indicate the technical has entered a corrective phase. A close below USD 17,375 could be an early signal that the technical picture is weakening.

Capesize Q3 18 Daily

Source: Bloomberg

Resistance – 18,051, 18,760, 19,540
Support – 17,280, 17,059, 16,658

The Exponential moving averages on the Q3 futures are now entwined and flat indicating the technical picture is now becoming neutral.

However, price action has made a higher high and higher low and remains above the neutral EMA’s which is technically bullish, giving mixed signals on the Q3 contract. The stochastic at 23 is oversold and this implies that downside momentum could be limited, and from a technical perspective supports a bull argument. It is worth remembering at this point that the front-end futures have a divergence and the index has the potential to diverge.

Downside moves that close below USD 17,280 would indicate the technical has entered into a corrective phase, likewise a close above the high on the 2-5-18 at USD 17,840 would indicate upside continuation as 1 – 2-day pullbacks often signal market continuation.

Capesize Cal 19 Daily

Source: Bloomberg

Resistance –17,684, 17,753, 17,860
Support – 17,184, 17,100, 16,310

The Cal 19 futures remain in a leg 4 corrective phase and have formed a neutral symmetrical tringle on the daily technical. The upward slant in the market is more aggressive than the downward slope with price action above all its averages. However, this pattern needs to break out for directional confirmation.

Upper trend resistance is currently at USD 17,684 with support at 17,184 for the symmetrical triangle, however the converging trend lines mean both levels will change daily.

This technical remains in a longer term bullish trend but in a corrective phase.

Source: FIS

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