Cocoa/Sugar Spread: The ‘Add-On’ Criteria Was Met

Selling More Candy

On September 30th, the blog entered a hypothetical short position in the March cocoa/sugar (x2) spread at +$2,318.80 (premium cocoa). The spread was rolled to the May contracts on February 12th, so the position is now short from the equivalent of +$2,856. We’re risking to a two-consecutive day close above +$7,500 (premium cocoa).

The blog entered a second ‘add-on’ position this morning when the spread rallied to -$500 (premium sugar). This ‘add-on’ spread will initially be risked to a two-consecutive day close above +$2,000 (premium cocoa).

May Cocoa Sugar (x2) spread daily

May Cocoa Sugar (x2) spread daily

In mid-January the May cocoa/sugar (x2) spread posted a multi-month low of -$3,725.60 (premium sugar). A break below this level would keep the pattern of lower highs and lower lows intact, confirming the ongoing downtrend. If so, we will look for another setup to continue adding to the short position. With a minimum downside target of -$20,000 (premium sugar), we want to squeeze all the profits we can out of this move.

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