24-05-2018

Dry Bulk FFA: Capesize Market’s Downside Momentum Looks to Be Slowing Down

Highlights:
The Capesize index has broken support and is now in a corrective phase having made a fresh market low. Downside momentum is showing signs of slowing as we approach the technical support zone. Remains corrective below USD 20,801 unless the index produces a lower high.

The June futures have now made a lower low and entered bearish territory. The stochastic is now oversold, a close above USD 16,040 would create a fresh market high indicating bull momentum is gaining, however price would remain below moving averages.

The Q3 futures remain corrective having failed to make a new high close. The stochastic is now in oversold territory suggesting downside momentum has the potential to slow down.

Upside moves the close above the USD 18,350 level would suggest we are entering a leg 5 bull wave.

The Cal 19 remains in range between USD 17,753 – USD 17,100, with the symmetrical triangle having failed to produce a breakout.

Capesize Index Daily

Source: Bloomberg

Resistance – 18,743, 20,801, 21,512
Support – 14,318, 12,928, 11,189

The divergence on the capsize index as we approached the technical resistance at USD 21,512 resulted in a market pullback. The close below the USD 16,890 support has created a fresh market low, indicating the market has entered a corrective phase.

Price action is now below the 200 period MA, making the 55 period MA at USD 12,928 the next near-term support zone based off the moving averages. However, we also se a swing high support zone between USD 14,318 – USD 13,524 which has the potential to slow the downward move.

The stochastic is now in bearish territory with the RSI entering a support zone, although not buy signals this could signal that downside momentum has the potential to slow down at these levels.

Technically price action is considered as bearish until the market makes a higher high. At this point that would be USD 20,801 unless a lower market high forms below USD 20,801.

Capesize June 18 Daily

Source: Bloomberg

Resistance –16,040, 17,110, 18,430
Support – 15,360, 13,440

We highlighted the bullish inverse head and shoulders pattern that was forming last week, we also noted that the near term technical was not so positive as both the June futures and the rolling front month futures were showing bearish divergences. Not a sell signal they were warning of a potential slowdown in upside momentum.

The close below USD 16,870 signaled the market had entered a corrective phase with the future making a new low at USD 15,360. We now have technical resistance at USD 16,040 as this is the recent market high. Upside moves that close above this level would suggest the technical could be firming. Price itself would remain below key moving averages in bearish territory. However, the stochastic is in oversold territory indicating we could see a slowdown in bearish momentum as the market is starting to look oversold. A close below USD 15,360 would indicate a fresh market low keeping the technical in bearish territory.

Capesize Q3 18 Daily

Source: Bloomberg

Resistance – 17,524, 18,350, 18,760
Support – 17,207, 17,059, 16,658

The Q3 futures failed to close above USD 18,760 level needed to signal a leg 5 bull wave had begun. The close below USD 17,690 created a fresh market low indicating the technical continues to remain in a corrective phase.

A close above USD 17,524 would have near term bullish implications, however price action itself would remain below key moving averages indicating the technical itself remains in a bear phase.

A close below USD 17,207 would create a fresh market low and have bearish implications going forward and would be in line with the current market trend. However, the stochastic is in oversold territory, not a buy signal it does suggest that momentum has the potential to slow down.

Technically in a corrective phase but near Fibonacci support with an oversold stochastic. This would suggest the leg 4 (Elliott wave) could soon reach exhaustion, putting this technical in a key zone. Upside moves that close above USD 18,350 would be above a major swing high and suggest the technical is once again becoming bullish.

Capesize Cal 19 Daily

Source: Bloomberg

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

We highlighted last week that focus should shift from the symmetrical to the range as the Cal 19 futures were now more that 2/3rds of the way through the triangle pattern.

The EMA’s and the 55 period MA are now flat confirming a lack of directional bias within the current market range.

Upside moves that close above USD 17,753 would be considered as bullish, whilst a close below USD 17,100 would be considered as bearish.

Source: FIS

Previous Next
 

Independence Day Special “JNPT - Pride of India’s Maritime Infrastructure”

View More Videos


Gallery

DRYCON 2018

View All Albums