Coffee Bulls Gain Some Technical Momentum

coffee_march2410.gifICE Futures U.S. coffee for May delivery has seen a rebound from the late-February low of $1.2825 to produce a choppy, four-week-old uptrend on the daily bar chart. The two popular shorter-term moving averages overlaid on the daily bar chart for May coffee futures have also just recently produced a bullish line crossover signal, whereby the 9-day crossed above the 18-day moving average. The coffee market bulls have recently gained some fresh upside near-term technical momentum. However, the bulls have more work to do in the near term to suggest the present price uptrend can sustain.
There is strong overhead chart resistance located at $1.3750. A close above that price level would provide the bulls with better technical strength and would also suggest the price uptrend would continue and even strengthen. Solid technical support for May coffee futures is located at $1.3000. A close below this price level would deflate the bulls, would end the choppy price uptrend on the daily chart and would also suggest a retest of the February low, or below. Stay tuned! Jim Wyckoff

One Response to Coffee Bulls Gain Some Technical Momentum

  1. Jonas December 23, 2015 at 12:01 pm #

    I would think that oil production, at a peak and in a caretl, would naturally undulate, if only because of imperfect information between the parties and the nature of incremental additions to production. A teacher told me when he was growing up, his farmer father would always plant what was abundant and low priced last year, because all of his neighbors would switch over to what was scarce and expensive the last year. Thus, OPEC may be operating on a theory of, “Since my neighbor and I both dropped production last month/quarter, I can increase my production and capture a little extra at higher prices,” only to be met with other countries doing the same. And then everyone decides, simultaneously, to shut off the damaging/expensive/less profitable wells, because everyone else is producing at the same time. Incremental additions: I would expect that at or near peak production, gains come in small jumps which slowly peter out, rather than in big jumps which can be turned off and on at will, by relying on natural pressure. Jump, decline, jump, decline: if there are enough countries doing this, it would be smooth as the number of jumps filters out the shock from each; but as the number of jumps decreases, the impact of each individual jump is felt more strongly in isolation.I see some lagged response to the loss of Libya in the figures, but the drop from August highs through September and October suggests that OPEC was unable/unwilling to sustain this full increase.OPEC seems to say that they are going to cap production at 30mb/d for this year and next, and that economic growth will exceed oil demand growth by a factor of four. Let’s see in March if production is still within 200kb/d of 30mb/d, without Libya. I would guess not.