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
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.
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