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Dry Bulk FFA: Capesize Index Due for a Correction

Capesize Index
Support – 16,819, 15,493, 13,340
Resistance – 21,558, 27,866
Resistance at USD 21,558
Support 16,819
Weekly stochastic in overbought territory
Daily stochastic in overbought territory

The oversold stochastic on the daily has resulted in an upward move last week, and new highs were achieved. Technically bullish, both the weekly and daily stochastics are now in overbought territory. This is not a sell signal as price remains the lead indicator, however it does warn that the index is starting to look a little overextended once again.
A close below USD 16,819 would neutralise the current bull trend, however market sellers should look for a lower high for anything other than mean reversal entries at this point. Market pullbacks that hold above USD 16,819 would suggest upside continuation, as would a weekly close above USD 20,657 as this would be considered as a technical breakout.

Capesize Oct 17 Daily
Support – 18,400, 17,260, 16,665
Resistance – 20,010, 20,165, 20,828
Resistance USD 20,010
Support USD 17,260
Daily stochastic at 87

Having broken out to the upside in the October Cape futures the stochastic has now entered overbought territory indicating that momentum is slowing down and a corrective wave has begun. Technically we remain bullish due to the higher highs and higher lows. USD 18,400 is now a key support as the market needs to confirm that the previous resistance is now acting as a support. A close below this level should have market longs looking to tighten risk, however ultimately the trend remains bullish above USD 17,260, unless a lower high is formed.
If support holds then the upside target is USD 20,010, failure to make a new high should attract technical sellers to the market.

Capesize Q4 Daily
Support – 17, 675, 17,060, 16,375
Resistance – 18,777, 18,940, 19,267
Resistance USD 18,777
Support USD 17,060
Stochastic at 92

The upside breakout last weak resulted in a bearish divergence forming, however it took 3 days before the Q4 futures hit their highs and moved a further USD 800 before reversing.
We have now entered into a corrective phase, with technical support at USD 17,675 and USD 17,060. Technically we remain bullish above USD 17,060. Market sellers need to see a lower high form before entering at this point. If price remains above the USD 17,060 level then the nearest upside target will be the recent high at USD 18,777. Failure to achieve a close above this level should attract technical sellers to the market.
Note the short period RSI is pulling back faster than price at this point. Implying we have the potential for another upside move. New highs will be needed to remain bullish.

Capesize Cal 18 Daily
Support 13,950, 13,814, 13,673,
Resistance- 14,271, 14,485, 15,150
Resistance at USD 14,271
Support at USD 13,673
Stochastic at 93

The close above USD 13,950 put the Cal 18 futures in bullish territory, and new highs were achieved. The stochastic is now in overbought territory but above 70 remains bullish. Market buyers should look for technical support around the trend line at USD 13,814. However we remain bullish above USD 13,673. Below this level the trend becomes neutral and the probability of a lower high forming increases. Upside moves that fail to make a fresh high would suggest the trend bias is turning bearish.
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Source: Freight Investor Services (FIS)

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