fis technical - freight- capesize...

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constitute any recommendation on our part. The information has been prepared without taking into account your investment objectives, financial

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Technical Report Global Leader Dry Bulk Derivatives

FIS Technical - Capesize

Highlights:

• Capesize Index- Holding within the

support zone. The index still needs

bullish confirmation.

• Q3– A symmetrical triangle has broken

to the downside, however the bullish

divergence means this still needs

confirmation that support has become

resistance.

• Cape v Panamax Q3 17 spread – The

mean reversion is now in play. The short

term corrective has not proved to be

truly bearish yet.

• Q3 v Cal 18 – A descending triangle with

a bullish divergence, caution on

following in a downside breakout.

Technical Analyst

Edward Hutton

44 20 7090 1120

[email protected]

Client Relations

Andrew Cullen

44 20 7090 1120

[email protected]

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Capesize Index

Support – 11, 414, 10,862, 9,468

Resistance – 13,214, 13,772, 15,301, 19,602,

The index held its support last week and this resulted in a

bullish close on the weekly candle. However the candle itself

was quite small and remains below the 8 period EMA,

suggesting more needs to be done to convince that a

technical bounce is upon us.

The stochastic remains neutral around the 50 level, however

volume has started to increase as has open interest, though

this is marginal.

A close above the 8 period EMA (US$ 13,214) would also be

above last week’s high and suggest the support zone should

hold. However a close below US$ 11,414 would imply

bearish continuation, targeting the US$ 10,862 support.

Technically in a support zone, we need to see more upside

momentum if the bull trend is to continue.

Note the 3 year monthly average has returned + 5.57% and

the 5 year average is flat.

Source Bloomberg

Capesize Q3 17 Daily

Support – 14,385, 13,770, 13,083

Resistance – 15,116, 16,400, 16,753, 17,008

Last week we highlighted the symmetrical triangle pattern

that was in play. A neutral technical pattern that needed to

breakout to confirm the next directional move in the market.

Technically the safer play is to wait for confirmation that the

previous support has become resistance. The downside move

has resulted in a bullish divergence suggesting that resistance

in the near term at US$ 15,116 could yet be tested. A close

above the resistance would neutralize the technical breakout.

If resistance levels hold, then market sellers should target US$

12,898, as this is a 100% move measured off the apex of the

pattern and the next logical area of support.



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Capesize v Panamax Q3 17 Spread

Support – 5,580, 5,360, 4,625

Resistance – 6,372, 6,945, 7,275,

The Cape v Panamax Q3 17 spread has started to mean

revert back to the 50 period MA. Last week we

highlighted the disparity risk, and noted that although

the trend was bullish it was a dangerous area to enter

fresh longs.

The spread is now making lower highs and lower lows

which is bearish in the near term.

The key to the corrective phase is the support zone

between US$ 5,580 and US$ 5,360. If the support levels

hold and the spread trades back above US$ 5,928 then

it is likely that we are witnessing mean reversion and

not a bearish trend.

Technically we have entered into a corrective phase.

However the major high/lows (rather the 1 day swing

high lows we are witnessing) within the trend currently

remain in bull territory. At this point it looks like a mean

reversion and should not be classed as a bear trend yet. Source Bloomberg

Capesize Q3 v Cal 18 Daily

Support – 377, 238, (-47)

Resistance- 999, 1,270, 1,383, 1,637

The Capesize Q3 v Cal 18 spread remains in a consolidation

zone in the form of a descending triangle. Technically this is

a bearish pattern due to the lower peaks within the pattern.

However a technical breakout is needed for confirmation

with this pattern. Market neutrals should wait for this

before entering.

The stochastic is turning lower, however any downside

breakout at this point would create in a bullish divergence,

and could result in a false breakout. Confirmation of support

becoming resistance will be needed before entering the sell

side because of this.

Buyers need to see either a higher low before entering from

the long side, or a close above US$ 999. As this would create

a new high and market buyers should be looking for a

technical bounce before entering a market long.



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Technical Analysis Glossary

Pivot Point

A point where the market makes a new high or low, before reversing in direction.

Trend Line

A directional line connecting pivot points.

Primary Trend

The main trend line over an extended period of time.

Secondary Trend

Distinct from but within the primary trend. Indicates recent trend.

Support

A previous market low where market participants have been prepared to enter long positions.

Resistance

A previous market high where market participants have been prepared enter short positions.

Range

An area between the support and resistance.

Relative Strength Index (RSI)

A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine

overbought and oversold conditions in an asset. The RSI ranges from 0 to 100.Typically speaking, an asset is deemed to be

overbought once the RSI approaches the 70 level, and likewise, as the RSI approaches 30, it is deemed to be oversold.

Fibonacci Retracement

Refers to areas of support or resistance. A Fibonacci retracement shows the potential retracement of a financial asset

relative to the original move in price. A trend line is drawn between two points and then the vertical distance is divided by

key Fibonacci ratios; 23.60%, 38.25%, 50.00%, 61.80% and 100.00%. This tool can also be used as a projection method.

Moving Average Convergence Divergence (MACD)

A trend-following momentum indicator that shows the relationship between two moving averages of prices. The MACD is

calculated by subtracting the 26-day exponential moving average (EMA) from the 12-day EMA. A nine-day EMA of the

MACD, called the "signal line", is then plotted on top of the MACD, functioning as a trigger for buy and sell signals on the

crossover of the two lines. The histogram highlights the narrowing and widening of the two averages acting as an indicator

for slowing or increasing momentum in the market. I.E a flattening or decreasing histogram in an upward market would

suggest that the upward move could soon stall.



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Award winning broker

In 2015 FIS was named as the best performing inter-dealing broker in Iron Ore swaps and options by Singapore-based SGX

AsiaClear for the third consecutive year.

For More information on this report please contact:

Edward Hutton

Tel: +44(0)20 7090 1121

E-mail [email protected]

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