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Technical Analysis #C-COCOA : 2016-10-26

Cocoa shipments fell

Shipments of cocoa to the harbors of Cote-d’Ivoire in period of October 1-23 were 152 thousand tonnes. This is almost 30% below the last-year level of 218 thousand tonnes on the same date. Will cocoa prices advance?

Cocoa prices slumped 15% since the mid-August 2016 on favorable weather in Western Africa. New agricultural season for cocoa will start on October 1. Cote-d’Ivoire accounts for 36% of global cocoa crops. Another 24% are harvested in the nearby Ghana. Additional factor for cocoa price increase may be its 5.6% higher imports to China in September 2016 compared to the same period of last year. Cocoa refinement in Asian countries rose 12.5% to 167.74 thousand tonnes in Q3 2016 compared to previous year, according to Cocoa Association of Asia. Previously Bahia Commercial Association reported that cocoa shipments to Brazilian harbors from the main agricultural regions of country tumbled 35% to 94.4 thousand tonnes in period of May 1 – October 16, 2016 compared to the same period of 2015. The share of Brazil in the global cocoa market is around 5%.


On the daily chart Cocoa: D1 has hit a fresh 4-year low and started correcting up after that. Its further increase is possible in case of higher demand in Asian countries and lower rates in Brazil and Core-d’Ivoire.

Parabolic is giving bearish signal. It may serve the additional level of resistance.
Bollinger bands have widened which means higher volatility.
RSI is below 50, it has formed two positive divergences.
MACD is giving bullish signals.

The bullish momentum may develop in case cocoa prices surpass the last upper Parabolic signal, the resistance line and the two last fractal highs at 2696. This level may serve the point of entry. The initial stop-loss may be placed below the 4-year low and the last fractal low at 2596. Having opened the pending order we shall move the stop to the next fractal low following the Parabolic and Bollinger signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 2596 without reaching the order at 2696, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Summary of technical analysis

Position Buy
Buy stop above 2696
Stop loss below 2596

Wednesday, 26 Oct, 2016 / 1:05

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