1 Way to Trade Cold Coffee Prices Now as Global Supply Fears Percolate
December coffee (KCZ25) futures present a selling opportunity on more price weakness.
See on the daily bar chart for December arabica coffee futures that recent price action has formed a bearish “head-and-shoulders” top reversal pattern. See, too, at the bottom of the chart that the moving average convergence divergence (MACD) indicator is in a bearish posture as the blue MACD line is below the red trigger line and both lines are trending lower.
Fundamentally, coffee futures prices are likely to fall further due to increasing global coffee supplies amid favorable weather in major coffee-producing countries like Brazil and Vietnam, which has led to higher production. Global coffee demand likely won’t match the higher world supplies, prompting price pressure on coffee futures.
A move in December coffee futures below chart support at 367.00 cents would give the bears more power and it would also become a selling opportunity. The downside price objective would be 295.00 cents or below. Technical resistance, for which to place a protective buy stop just above, is located at 400.00 cents.
IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any trades and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.
Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%):
Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.
On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.