The last time I wrote about market moves in coffee the coffee futures were trading at 152.65 and based on the price action I suggested price should move lower and gave $145 and $125 as my downside targets. Since then target one was hit and price has moved as low as $128.80, close to the target II at $125. The first level was penetrated without any effort but then it turned into a resistance that has kept price capped for almost two months. Price of coffee found support at 161.8% Fibonacci extension level just above my target II at $125 and had a close outside the lower Bollinger Bands. Since then we’ve seen this market moving sideways inside the Bollinger Bands with roughly equal highs at $147. Price has made higher lows suggesting pressure is building against this resistance level.
The 50 period MA is still pointing lower while price of coffee struggles to close and stay above the $144.92 level. Stochastics are overbought and price has created a shooting star candle right at resistance which coincides with 100% Fibonacci extension level. Also, a regression channel drawn from the November 2014 high comes into play here. Price is trading right at the upper end of the channel adding to the bearish picture. The next important support levels are at 136.80 and 131.95.
Coffee, 240 min
Price has been trending higher in a channel since the April 14th low. Now that price is moving lower again the lower end of the channel could provide some support as the 50 period MA and lower Bollinger Bands are relatively close to it. The rising trendline is currently at $140.45 while the 50 MA is at $139 and the 1.5 stdv lower Bollinger Band is at 139.12. In addition, there is a level that used to be a resistance roughly at $138.20. Stochastics are approaching the lower end of the range.
This two month sideways move suggests that supply and demand are now more balanced than at the time of my previous analysis on Coffee. Price moved almost to my target level at $125 but then turned around and has been challenging the $145 in several occasions. This could imply that the market participants wanted to cover their short positions before this important $125 support level and are now looking to take the market higher but the latest price action suggests there is still more weakness to come in Coffee. Short term picture is also negative as price has reacted lower from the resistance. I am therefore in a ‘sell rallies mode’ and look to benefit from the downside momentum. Here are my short term targets: target 1 at $138.20 and target 2 at $132. If price breaks below the sideways range a longer term downside target 1 is at $115.
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Chief Market Analyst
Disclaimer: Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of purchase or sale of any financial instrument.