Best Thread COFFEE - The next big bull?

I've been short and long of this market for ages now and its not really going anywhere in any hurry. Yesterdays sell off should have knocked me out of a long except I was in whitstable buing Kitesurfing gear and I missed the close (not too clever in the long run) but today its holding above my exit. Have moved a stop in to cover any falls today.
Coffee and Sugar are giving me heartburn these days, sugar does a huge rally then spends a week giving it all back, then another huge rally. They are both just getting annoying.

Thanks for the charts,
how's soya looking to you?
I bottled it couple of days back and look at it now.....

Missed exit on the coffee longs (entry 106) but stop still holding just below previous lows, intending to build up on position if breakout warrants it.
Bit gutted with not executing the soya longs but I had to make a decision and opted for coffee, remind me to disregard fundamentals next time.

I was just looking at the Liffe robusta contract and was looking at the inverted futures curve, that is the near in contracts are worth more than the further out contracts. This means that it does not pay to store coffee. It would seem to me from what I know about grain markets that this is a rare situation that will eventually reverse itself. What does everyone think about this trade;

Short may 1442

Long July 1428

With the idea that the spread should at least go to zero. Can anybody tell me why this inversion should persist?

ha - was trading liffe when back at £7-£8 - the problem with coffee and it seems so again is the massive level of volatility meaning you need deep pockets to cover yourself ...

zftrader - interesting possible play - spreads could (should?) zero out but when? how much can you afford them to widen first perhaps? .. any other thoughts..?

Does anybody know what the all time record inversion is on consecutive month contracts? I would want to commit enough margin to withstand double the historical worst case scenario, coffee is a pretty wild thing to trade.

zftrader said:

I was just looking at the Liffe robusta contract and was looking at the inverted futures curve, that is the near in contracts are worth more than the further out contracts. This means that it does not pay to store coffee. It would seem to me from what I know about grain markets that this is a rare situation that will eventually reverse itself. What does everyone think about this trade;

Short may 1442

Long July 1428

With the idea that the spread should at least go to zero. Can anybody tell me why this inversion should persist?

Click to expand...

I heard a rumour that the current front month (or ha it just expired?) had a huge squeeze on it due to damp in an Italian warehouse destroying crop for immediate delivery........... not sure how far out this might affect things.

Typhoon Xangsane Lashes Vietnam, Leaves Three Dead (Update3)

By Nguyen Dieu Tu Uyen and Francisco Alcuaz Jr.

Oct. 1 (Bloomberg) -- Typhoon storm Xangsane lashed Danang City and neighboring Quang Nam province this morning, destroying homes, roads, farms and boats and cutting power in central Vietnam. Three people were killed and 72 injured, Vietnam Television said.

Xangsane was 15 miles (24 kilometers) west of Danang and traveling further inland as fast as 12 miles per hour at 10 a.m. local time, Vietnam's Meteorological Office said on its Web site. Winds at the center ranged from 55 mph to 72 mph. It weakened on hitting land, prompting its downgrade to a severe tropical storm from a typhoon, Central Meteorological Office director Bui Minh Tang said. ``The storm's eye left Vietnam and entered Laos early this afternoon,'' he said in a telephone interview.

``Losses are big, but I'm afraid that there will be more and more losses,'' Deputy Prime Minister Nguyen Sinh Hung said on state TV from Danang, the nation's fourth-largest city.

Xangsane, which means elephant in Laotian, is the 18th storm of this year's Pacific cyclone season. Last year, about 50 people were killed when eight typhoons and tropical storms made landfall in Vietnam. Xangsane struck the Philippines three days ago, leaving at least 76 people dead, that country's Office of Civil Defense said today.

River Rising

Vietnam state TV showed flooded residential areas and rice fields and uprooted trees. It reported that parts of Ho Chi Minh highway, one of the main transportation arteries, had collapsed. About 4,000 people were cut off on an island off Quang Nam.

The Huong River was rising, threatening the ancient imperial capital of Hue, Nguyen Xuan Ly, chairman of the Hue People's Committee, said in a telephone interview. About 3,500 homes were destroyed or lost all or parts of their roofs.

Xangsane also ``seriously damaged'' Hoi An, a United Nations cultural heritage site, Ho Thi Thanh Lam, vice chairwoman of the Quang Nam People's Committee, said in a separate interview. The roofs of many houses were torn off and ``a lot of ships anchored at port have been broken because of the strong waves,'' Lam said.

More than 200,000 people were evacuated from Danang City and seven provinces, Van Phu Chinh, head of the flood and storm control committee for the central provinces, said in an interview.

Vietnam Airlines said some flights to Danang and other destinations in central Vietnam had been canceled. It planned to resume service between Hanoi in the north and Ho Chi Minh in the south at 2 p.m. local time.

To contact the reporters on this story: Nguyen Dieu Tu Uyen in Hanoi at [email protected] ; Francisco Alcuaz Jr. in Manila at [email protected]

Last Updated: October 1, 2006 04:42 EDT

I'm currently Long New York,Coffee basis March 07 contract.

Baptist, you still holding long Robusta? This typhoon could get the market spiking again.

There was a pretty nasty correction recently in London - did you come out unscathed, after rolling into November?

Still planning to 'retire out on this one trade'?

TIA

Robusta

Hi DaveT,

I remain a Long Run Robusta Bull.

That said I am continually adjusting the degree of my position size, to avoid draw downs on pull backs which allows me a slightly larger size by being more active.

I was very fortunate at the contract change over as I wound my full position up on the last few days and awaited till recently on a candle signal reentry, some of that had to do with a noted divergence in relative performance between the two time frames (November being weaker). Which you also commented on.

Also one of the thread contributors had also alerted me to a short term squeeze (old contract) due to damaged stocks, which I followed up and confirmed to be accurate, which may well have confirmed the short term blow off and served as further reason to take a breath (& profits), so thanks to T2W boards and its contributors for that one!

I reentered on buy stops during this week which has been beneficial and i have just taken that profit as I have seen two evening stars and we are getting close to previous highs. In short I am looking to buy in cheaper and even have the smallest of short positions. Which I consider as a bit opportunist given how bullish I am long run.

Arabica chart fails to excite me and there appears to be quiet a loose correlation between the two beans, although my observations seem to imply that Robusta seems to have preceded Arabica on big moves and seems to have an accentuated move in bull runs relatively.

Any reason why you choose to trade the underlying you have chosen?

Chart attached.

DaveT

Not quite sure why you are so keen on the weather. I have followed your threads with a degree of interest - and you have informed us of weather patterns (and truck movements) in the Ivory coast, a heatwave in the US midwest which was supposed to lead to a surge in Soybeans prices. Now we are informed of storms in Vietnam.

It is very difficult for "amateur" traders on T2W to make money trading fundamentals, and certainly weather conditions viz a viz the commodity markets. There is so much misinformation peddled.

As it happens coffee could be shaping up for a significant long term move upwards as in 1994 and 1997. If it happens, those who profit will be those who can ignore the "noise" in market, and spot the "tightening up" of the supply and demand cycle.

PS when this thread started in November 2004, no mention was made of the truly significant bull markets which have happened during the past two years - namely sugar, copper, gold, silver, natural gas and crude oil (and its derivatives). The point I am making is that by predetermining what the next bull market is going to be, it is very easy to miss those that actually materialise

The Baptitst -

Thansk for your reply.

I am LONG March Arabica for long-term technical resasons first and foremaost.

I do agree that the recent surge in Robusta could be a precursor to a similar move in New York, as the 2 markets have historically shown some lag/lead times.


On a WEEKLY basis, for instance, the chart shows a recent reversal, long-term trendline hold, and a tight 'volatility squeeze' - ie Bollinger Bnads close in on the overlaid Keltner Channel.

This tells me to expect a strong move over the next 2-3 months.

Here is the DEC Continuous Weekly chart to depict that technical observation:

Pippinn -

I appreciate your comments.

As for the weather postings, well it's just information, which may or may not lead to a market move ofcourse.

I would not (or should not) place too much emphasis on any particular event - especially as I am fist and foremast a techncals-based trader, or position trader.

However, in Agriculturals, weather can and does often provide the 'spark' for a move, which wass set-up for other fundamental reasons, eg low stocks-to-use etc,

In Soybeans this year, the weather threats proved unfounded, and the seasonals took over.

Your point about the other commods wihich have made strong and singificant bull moves is a good one - I guess the title of this thread will be accurate at some point, but is, I admit, a little void considering the time that has now passed!

DaveT

Good luck. Coffee could be very interesting within the next year or so

Continuation triangles and Vol's

DaveT said:

The Baptitst -

Thanks for your reply.

I am LONG March Arabica for long-term technical reasons first and foremost.

I do agree that the recent surge in Robusta could be a precursor to a similar move in New York, as the 2 markets have historically shown some lag/lead times.


On a WEEKLY basis, for instance, the chart shows a recent reversal, long-term trendline hold, and a tight 'volatility squeeze' - ie Bollinger Bnads close in on the overlaid Keltner Channel.

This tells me to expect a strong move over the next 2-3 months.

Here is the DEC Continuous Weekly chart to depict that technical observation:

Click to expand...

Interesting and good comment, Similarly to Pippin's valid points I am also a technical Long term trader and relatively ambivalent to current newsflashes, although sometimes info on true supply/demand factors may prove helpful.which allows me to be in and out, (far more in than out often really just the degree) with continual strong bias to Bull.

My reason is this annual chart attached. Like DaveT I like volatility squeezes on symmetrical triangles as a set up for a move and I feel in the quartely I have posted we have a set up within a setup which is the strongest position to be for big moves.

I have also circled the Stochastic entries that are when a break up through the 20% low lines occur, also coinciding with K% entries.

The first marked '1' is worthless as it was just a slowing down of a descent in a vicious 7 year down swing. The second ( MARKED 2) was good but due to the length of period a qtly chart you had to sit tight for your run up. 3 like 1 still had to work out the second downswings of 1993 to 2004, although the extremity and volatility was already squeezing in. We are currently in entry 4 which is the follow through signal from 3 which has been accompanied by an increase in Vol's.

We had 8 qtrs to peak from signal 2 the most similar. We have had 9 qtrs since initial 4th signal.

It is commented by Triangle traders that the BO usually attains at least 2/3rds or 3/4's of the triangular base size, added to the apex. I am to the upside of that view in this case. We have despite mainly bearish qtrs still seen 2000 upside points qtrs before on 2 occasions, this could also be exceeded in a true upside break from this formation.

Enjoy the long term chart, True position traders have plenty of patience, the market could take 3 years to reach target levels or the market may just slumber for awhile without invalidating the pattern.

In my view 2004 was not a bad year to discuss upside it looks like the last relative low for me.

Good Luck.

It is not currently a good call to buy Arabica on the back of Robusta strength. The Supply/Demand is very different. If you feel bullish Robusta I think it better to buy that rather than to think the Arb will widen again.

New York Coffee charts look constructive for a strong break out to the UPSIDE.

Good move today so far.

Resistance is around 10750-10800 basis nearby.

Weekly chart shows an inverse Head and Shoulders pattern, break point 10800 approx.

Target 12500.


Daily continuous shows an ascending triangle, break point 10950.

Target 12500 also.

DaveT said:

New York Coffee charts look constructive for a strong break out to the UPSIDE.

Good move today so far.

Resistance is around 10750-10800 basis nearby.

Weekly chart shows an inverse Head and Shoulders pattern, break point 10800 approx.

Target 12500.


Daily continuous shows an ascending triangle, break point 10950.

Target 12500 also.

Click to expand...

DaveT - Which US exchange is trading the US version of Coffee (KC)?

The Baptist -


Arabica Coffee is traded on NYBOT (New York Board of Trade).

http://www.nybot.com/


There is also a local Brazil-bases Coffee contract, traded on the BMF (Bolsa de Mercadorias & Futuros)

http://www.futuresource.com/quotes/quotes.jsp?s=BICF&t=Future