Cocoa has been kind to speculators of late as we we’re fortunate to catch a few trades. Will three times be a charm? From here it appears prices could be headed south. In the previous two weeks September futures bounced off the 61.8% Fibonacci levels gaining eight consecutive days’ elevating futures 8%. Today will likely mark the first negative day in nine with current trade dragging futures nearly 3% lower and below the 50 day MA (light blue line).
I suspect in the near future a probe of the 100 day MA (red line) and a potential retest of the 61.8% Fibonacci level at 2200 in September.
Long liquidation is just getting underway…pressuring the market so fade rallies. I am shifting from neutral to bearish here thinking we see a swift 4-6% depreciation…certainly enough for a bearish trade if I’m correct. COT is showing that speculators are still long so weak longs should be shaken out and that could accentuate the move as they get flushed out. Those long do not make the cardinal sin…allowing a winning trade become a losing trade. Either exit or reverse is my suggestion.
Given the lack of any fresh news near term the cocoa market should remain in a range between 2200 and 2350 for this contract but a breach of either pivot point would likely lead to an additional 2-3% move? The fact that we are rolling over from overbought levels (stochastic) and the outside market influence is bearish I am leaning in that direction. By outside market influence I elude to the inverse relationship to the greenback…trade accordingly.
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