Black Swan Insights

All good trades must come to and end as they say. The time has come for my Sugar short. I caught a nice 14% downside move that was pretty much straight down. It would be piggish of me to press the short any further. When you trade on leverage, you cannot risk a large oversold bounce (you never know if it is the beginning of a large move higher or just a technical bounce).

So why did this trade work so well? Luck. When I shorted sugar the fundamentals were beginning to sour along with a negative technical backdrop. Furthermore, all soft commodities were weak during this period, which pressured sugar lower. In short, the general conditions favored lower sugar prices.

I might consider shorting sugar again on a possible bounce higher.

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Shorting Sugar
Update on the Sugar Short

Black Swan Insights

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A few days ago I mentioned that Sugar was a good short from both a fundamental and technical view. So far the trade has done well. The longs are currently in liquidation mode as market sentiment has changed dramatically. A few weeks ago the bulls were focusing on Brazil's weak crop estimates. Now, everyone is worried about the expected global sugar surplus of between 4-7 million tons for the 2011/2012 season. Furthermore, the risk on market sentiment has been turned off courtesy of Europe's financial implosion.

This situation represents trouble for the sugar bulls as the market is heavily long sugar. The sugar market is also at a key technical level. See chart below

March Sugar is currently trading at 25.84, which is just above the early August low of 25.38. If sugar fails to hold this level than it exposes 24 as the next downside target. If 24 is breached then we could see sugar fall to 22.

Volume, as you can see from the chart is starting to pick up as spec longs sell their losing positions. Adding to the bulls' woes, the CME's margin hike made it a little more expensive to hold sugar.

I remain short Sugar.

Black Swan Insights

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Words of Wisdom from Leonardo da Vinci

1. I have been impressed with the urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.

2.Simplicity is the ultimate sophistication.

3.Life well spent is long.

4.Life is pretty simple: You do some stuff. Most fails. Some works. You do more of what works. If it works big, others quickly copy it. Then you do something else. The trick is the doing something else.

5. Marriage is like putting your hand into a bag of snakes in the hope of pulling out an eel.

Quick Update: Closing Sugar Short

Update on the Sugar Short