Coffee futures can be one of the more volatile commodities around, especially during different seasons where drought concerns or frost concerns in brazil can really move this market. I remember when I first started trading coffee about 16 years ago and got caught selling call options in a market that started building weather premium…that a was a painful lesson for a beginning commodity broker but as you can see, one that lasted a long time…
So this morning I drove into the office and was thinking which market should I analyze and share with you? Gold seems to be in a tight range and should break out, SP 500 broke the significant 2000 mark…but as scanned my CQG terminal, the first big move I see from the overnight session is coffee….up 800 at the time I am writing this. So the market choice was obvious to me – coffee is this a real break out to the upside or a fake out?
From what I am reading there is uncertainty in the market right now if Brazil coffee stocks can help meet the demand or not. The market will eventually explore and find a balance to reflect the “correct” price that meets supply/demand but until then we can see volatility both ways. I am much more of a chartist than fundamental trader and I am trying to find clues by looking at the daily chart below – and it is not an easy picture to read.
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I did not get any of my ALGOs to produce a buy or a sell signal. Price action today did make a new 20 days high ( previous high was made Aug. 1st)
So far I am seeing lower lows and lower highs since the high made Aug. 1st so I will be watching for clues. If this market can close above 200, it may signal the beginning of another strong leg up, failure to break this level may signal a resumption of the recent down trend.
Daily Heikin-Ashi coffee chart for your review below: