16-05-2018

Dry Bulk FFA: Capesize Market On Bullish Mode

The Capesize index remains in bullish territory above USD 16,890. We continue to see a slowdown in upside momentum as price action begins to cluster indicating the divergence with the RSI could soon signal a market pullback.

The June futures have created and confirmed a bullish inverse head and shoulders pattern. The near term technical is overbought and in need of a correction. Pullbacks below USD 16,370 would signal pattern failure.

The Q3 futures has formed but not completed a bullish inverse head and shoulders pattern. A close above USD 18,760 would confirm the H&S pattern and signal that we are on leg 5. Likewise, a close below USD 17,280 would indicate leg 3 of wave C and indicate lower pricing.

The Cal 19 futures remain in a corrective phase within the symmetrical triangle. this technical is now looking less reliable and from an analytical perspective focus should be on the range between USD 17,753 – USD 17,100.

Capesize Index Daily

Source: Bloomberg

Resistance – 21,512, 22,613, 30,033
Support – 16,890, 16,742, 14,374

The Capesize 5TC continues to remain in a bullish trending environment with price action staying above our USD 16,890 support. Below this level would have signaled that the market could be entering a corrective phase.

The 21 period RSI remains in divergence (no divergence showing on the stochastic anymore) as we approach our secondary resistance at USD 21,152. Price action itself is now starting t0 cluster indicating that upside momentum is slowing down. Not a sell signal but a warning that we could see a market pullback within a bullish trending environment soon.

Technically the trend remains bullish above the USD 16,890 support. A close below this level would create a fresh market low and indicate that the technical is either in a corrective phase or the trend is potentially reversing.

Downside moves that hold above USD 16,890 would keep the technical in bullish territory implying we could see higher prices.

Capesize June 18 Daily

Source: Bloomberg

Resistance –18,525, 19,033, 19,812
Support – 16,870, 16,370, 15,714

The June futures continue to remain in bullish territory with price action making new highs. The technical it looks like we have broken an inverse head and shoulders pattern which is a bullish technical pattern that is often associated with Elliott wave as a basing pattern.

The near-term picture is not so positive and is showing a stochastic divergence on both the June 18, and the rolling from month contracts. Not a sell signal it id does indicate that upside momentum could be slowing. Market pullbacks that close below USD 16,870 would create a fresh market low and signal the market has entered a corrective phase. A close below USD 16,370 would indicate pattern failure to the inverse head and shoulders. From a technical perspective this would suggest the June 18 futures should be regarded as bearish.

Downside moves that hold above the USD 16,370 support would keep the futures in bullish territory and imply upward price action going forward.

Capesize Q3 18 Daily

Source: Bloomberg

Resistance – 18,760, 19,000, 19,540
Support – 17,690, 17,280, 16,561

The Q3 18 futures have the potential to produce a bullish inverse head and shoulders pattern.

However, at this point we have not seen pattern completion and need to see a close above USD 18,760.

The 8 period EMA has now started to diverge from the 21 period EMA with price action and the shorter period EMA now above the 55 period MA. The technical is showing signs it may have exited the leg 4 corrective phase and this is supported by the high on the fresh market high on the 18 – 4 – 18. However, the recent upward move potentially could have been a leg B bull trap and a close above this level (UD 18,760) is needed for confirmation of a leg 5 bull wave via the head and shoulders pattern.

The stochastic is in overbought territory indicating upside momentum could be limited in the near term. Market pullbacks that close below USD 17,690 would create a fresh market low indicating the technical is again corrective, and a close below the fractal low on the 27 – 4 – 18 at USD 17,280 would from an Elliott wave perspective suggest we are on Leg 3 of wave C.

Capesize Cal 19 Daily

Source: Bloomberg

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

The Cal 19 futures continue to remain in the leg 4 symmetrical pattern. From a time perspective we are now more than 2/3rds into the pattern which brings the reliability of the pattern in terms of a technical breakout play into question.

Elliot wave analysis indicates that we remain in a leg 4 corrective phase, the pattern would suggest neutrality however price action is above the EMA’s which remain in bullish territory. The stochastic at 83 is in overbought territory and showing signs of turning lower.

From a technical perspective this market should now be considered as a range. Resistance is at USD 17,753 and support is at USD 17,100.

Source: FIS

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