Coffee Remains Mired in a Downtrend

September coffee futures at the New York Board of Trade remain stuck in a six-month-old downtrend on the daily bar chart, drawn off the late-January high of $1.3175. Prices just this week hit a fresh 19-month low of 93.95 cents. As the potential frost-freeze season in coffee-growing regions in Brazil is winding down, with no apparent threats this year, speculative traders have gradually been taking a weather premium out of the futures market the past several weeks.


The bears are in near-term technical command of the coffee futures market. Their next downside objective is closing prices below solid technical support at 90.00 cents. Below that lies longer-term chart support at the 2005 low of 84.45 cents, basis nearby futures.
click on the chart to enlarge
September Coffee
For the coffee market bulls to begin to regain some near-term technical footing, they will first have to push September futures back above major psychological resistance at $1.0000 a pound. The 14-period slow stochastics oscillator does show that September coffee futures are oversold, at present, as both the %K and %D lines of the indicator are well below the 20.00 reading that suggests a market is overdone on the downside and due for at least a corrective upside bounce very soon.
On a longer-term technical basis, the bulls can correctly argue that nearby coffee futures are in a choppy uptrend on the monthly continuation chart, from the 2001 low of 41.50 cents. But for the bulls to gain fresh longer-term technical strength, they will have to push nearby coffee futures above technical resistance at this year’s high of $1.2590, basis nearby futures. Above that lies longer-term resistance at the 2005 high of $1.3700.
NOTE: I have recently completed an e-book called “The Art of Effective Stop Order Placement in Trading Markets.” You can buy it for $14.95 by clicking on the “SUBSCRIBE” section of my website at www.jimwyckoff.com . If you are like many traders who feel your protective stop placement methods need improvement, then my e-book will be a valuable resource to you. I also recently finished an e-book entitled “62 Rules Used by Profitable Futures Traders,” which sells for $19.95. That’s the best trading investment for 20 bucks you’ll ever make.–Jim

No comments yet.

Leave a Reply