Profit-Taking, Stops Push Cocoa Sharply Lower

May cocoa futures on the New York Board of Trade were under strong selling pressure in busy early dealings Tuesday. Prices hit a low of $1,716 as of this writing and were trading near the session low and hit a fresh three-week low. Heavy stop-loss orders were triggered. Profit-taking pressure from recent gains was also featured, after May futures hit a fresh contract high of $1,815 a metric ton just last week. No serious chart damage had occurred Tuesday morning, but strong follow-through selling pressure on Wednesday would likely inflict serious near-term chart damage.

Cocoa futures have very recently been trading in a general inverse relationship with the bigger “outside” New York futures markets–gold and crude oil. Tuesday morning’s gains in crude and gold and losses in cocoa futures continued to fit that pattern. Today’s price move in May cocoa below what was solid chart support at last week’s low and the last “reaction low” on the daily bar chart, at $1,725, is bearish and has given the bears some fresh downside technical momentum.
click the chart to enlarge
Cocoa Futures for May 2007
There is also strong technical support located at the $1,700 level in May NYBOT cocoa. Overhead chart resistance for May cocoa futures lies at $1,740, at $1,760 and then at Tuesday’s high of $1,780. Strong chart resistance lies at the contract high of $1,815 in May cocoa.
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