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Dry Bulk FFA: Capesize Market Looking Bullish For the First Quarter of 2018

Capesize Index appears to be technically bullish above USD 20,626. However at USD 13,000 above the 200 period MA we are starting to look over extended.

• Dec – A bullish trending environment but a large mean reversion gap with the 50 period MA is a concern. Market sellers should remain cautious with price action above the longer term means, even if we do see a lower high and lower low.
• Cape Q1 18 – Over extended and starting to correct, recent market pullbacks have been short lived in terms of time. Potentially more downside to go in the near term, this trend remains bullish and sellers should continue to be cautious.
• Cal 18 –A bullish trend that has started a corrective phase, the short period RSI would suggest this trend is not yet over and sellers should remain on the side lines.

Capesize Index

Support – 22,515, 20,626
Resistance – 29,798, 31,549
Weekly stochastic in overbought territory

Daily stochastic at 100

The Capesize index continues to remain in bullish territory and make fresh highs. Last week’s bearish divergence failed to produce market weakness and is no longer a factor, as short term momentum indicators are now sitting at maximum levels. A note of caution as price action is now USD 13,000 above the 200 period moving average, and is starting to look overextended. However, market pullbacks remain in bullish territory above USD 20,626, below this level there is an increased probability of a lower high forming. Pullbacks that hold above this level could attract further buying interest.

Capesize Dec 17 Daily

Support – 22,777, 21,535
Resistance –28,472, 32,539
Daily stochastic is at 95

Last week’s fresh market high put the Dec futures back in bullish territory, and increased the probability of higher lows forming. The bearish divergence had minimal effect creating a one day pullback only. Technically we remain in bullish territory above USD 16,270, however market pullbacks that close below the
61.8% retracement at USD 20,292 should be treated with caution. The mean reversion gap with the 50 period MA is a concern.

Market pullbacks that hold above USD 22,777 should attract buying interest, however failure to make a new high should have market longs looking to tighten risk.

Capesize Q1 Daily

Support – 11,783, 11,703
Resistance – 14,983, 15,909
Stochastic is at 95

The two day pullback in the Q1 futures would suggest that we are entering into a corrective phase within the bull trend.

At this point the trend remains bullish above USD 11,703 as this is the most recent significant low. Market pullbacks that hold above USD 12,985 – USD 12,367 Fibonacci support levels should attract technical buying interest to the market.

Upside moves that fail to make fresh highs should have market longs looking to tighten risk, as this would result in a lower high, and a potential longer term corrective phase could be forming. However, we remain above key averages suggesting market sellers should continue to act with caution.

Capesize Cal 18 Daily

Support – 14,465, 14,093
Resistance – 16,191, 16,631
Stochastic is at 95

Like the whole Capesize complex, the Cal 18 continues to remain in a bullish technical environment.

Technically we remain bullish above USD 14,093.

However market pullbacks that fail to hold above the USD 14,971 50% Fibonacci retracement, have a higher probability of not making a fresh market high.

We can see on the chart that there is a mean reversion gap between price and the 50 period MA and this would suggest there is more downside in this correction in the near term. This doesn’t mean a directional change in trend at this point.

Market longs should tighten risk if a lower high forms as this would suggest selling pressure is increasing.

Source: FIS (Freight Investor Services)

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