Coffee Perks Up

In the last three days coffee has appreciated nearly 10 cent or 8.5%. Has the sleeping giant awoken? For weeks now I have tried to sway would be commodity speculators/hedgers, investors to position themselves for a coming appreciation. Today futures are challenging their 50 day MA (red line) for the first time since 5/17. It is apparent that we are experiencing a bullish breakout from weeks of sideways consolidation. We are currently trading at a fresh five week high. Looking at both daily and weekly charts seen below an argument can be made for a significant bottom and it would appear we have the potential to see further gains short-term. A potential frost or freeze in Brazil would be a game changer…just on rumors see how futures reacted.

Though the longer-term bear trend remains in place with coffee that has existed for the last two years. The jury is still out on how high this leg can lift coffee futures but the monster short position could get this market moving more than one would think on short covering. I see the next resistance at the congestion area just above the 38.2% Fibonacci level near $130.

Now for the charts…

Daily Coffee:

Coffee Futures (Daily), July 17, 2013

Coffee Futures (Daily), July 17, 2013

Those in bullish trade should be lightening up on the recent ascent. My suggestion is to use Fibonacci levels as objectives on further advances. Fresh entries should be buying dips that hold the 20 day MA (light blue line). I like the idea of purchasing back ratio spreads on down days and for futures trades as opposed to naked outrights I suggest selling calls or buying puts as a hedge.

Weekly Coffee:

Coffee Futures chart, weekly, July 17, 2013

Coffee Futures (Weekly) July 17, 2013

Prior to this week coffee had gained two out of the last three weeks and this week is far from over but so far futures have appreciated 7.05%. Stochastics are starting to turn on the weekly chart. Longer-term I think between now and year end prices have a chance of advancing to the red horizontal line- 15% above current trade.

Risk Disclaimer: This information is not to be construed as an offer to sell or a solicitation or an offer to buy the commodities and/ or financial products herein named. The factual information of this report has been obtained from sources believed to be reliable, but is not necessarily all-inclusive and is not guaranteed to be accurate. You should fully understand the risks associated with trading futures, options and retail off-exchange foreign currency transactions (“Forex”) before making any trades. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. You should carefully consider whether trading is suitable for you in light of your circumstances, knowledge, and financial resources. You may lose all or more than your initial investment. Opinions, market data, and recommendations are subject to change without notice. Past performance is not necessarily indicative of future results. This report contains research as defined in applicable CFTC regulations. Both RCM Asset Management and the research analyst may have positions in the financial products discussed.

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