Coffee

[bgold]

Dec Coffee:
Coffee prices declined in 7 waves from the 8150 contract high to the 6100 low of June 20 for a completed double zigzag second wave.

Support at 6100-200 held 4 times, even after fund liquidation of Sep rally. Momentum indicators do not give clear signal, though CCI might go tru 0 on next up move.

Attached Elliott wave count suggests possible iii circled of 3 of C leg up to a high above 7500.

BUY on breach of yesterdays' high 6590, risking 300 (stop at 6290 yesterdays' low) for a 800+ point gain?

Looks like a reasonable trade? I admit I like better expectancy ratio's so will study intra-day charts for better entry.

Any thoughts/observations?

 

[ianshep]

J,

You've really blinded me with science this time! Is that a chart or a game of Scrabble? :cheesy:

The long term chart shows that we are trendless and rangebound. Interestingly, the downward sloping channel from your Dec03 chart is completely flat on the continuation chart i.e. while there was a speculative surge up to 80 in Z03, physical buyers were never willing to pay more than 70, except for one blip. This makes 70 heap powerful resistance in my book (for contracts near to expiry) and probably limits your profit potential. Also, if you project the upper trend line on your chart forward, it also lies at 70 i.e. speculation can drive prices higher for far out contracts, but price is always tending towards 70 as expiry approaches. The physical market's view always wins in the end!

Good luck with your trade.

 

[bgold]

Ian,
Great feedback, very much appreciated. I stayed out yesterday which was not difficult considering awful trading pattern. Given your input I will do further research, especialy into the elliott wave count of your chart (i replicated it in futuresource.com).

Thanks also for earlier pointer towards Sucden. Do they trade on-line contracts? And, would you know whether they are a competitive alternative to US brokers like Refco/Lind Waldock (which can be integrated in eSignal).
Thanks again, be in touch.
Jeroen

 

[oatman]

When I was last with Sucden, they only offered Pats System J-Trader and Liffe and Eurex contracts. I left because I wanted some US markets. They were developing their own software due to be released about now. Commission rates are competitive and negotiable, as I mentioned earlier. Have a look at their website. There are links there. Give them a ring.

 

[bgold]

Thanks for your comment/suggestion. Would you have recommendations for any on-line offshore/US based brokers?

 

[oatman]

IB is popular here. I'm using them
http://www.interactivebrokers.co.uk/

 

[bgold]

So am I. IB works great for financial contracts, single stock etc. They are better than anything I have seen, very professional.

But unfortunately have no commodities such as softs, grains, meats etc. Also I have had unhappy experiences with some of the mini-contracts such YG YI before the bullion hype of past 6 months. Liquidity was limited with wide bid-asks. My worst experience was a trade prior to Iraq invasion in QM (mini-WTI ) which was stopped out (silly me) at the high above 40.- CL never traded at level were I put my stop. One never ceases to learn; shame that I am always paying for the pleasure.
thanks

 

[bgold]

Ian,
Following up on your post, I had a chat with a "coffee analyst" whom mentioned that when one looks at yearly chart of coffee (am afarid haven't seen myself), one sees coffee is trading within the bottom 10% of a 30 year range. Apparently this also occured in 1975 and again in 1992 and each time, sizable rallies followed. The consolidation period that preceded each advance lasted 23 and 21 mos, respectively. We are now 21 mos into trading up from the 2001 low.

This is certainly no good reason to put our hard won capital at risk but its worth keeping close eye on coffee. Another low is a good possibility but coffee has been building what seems a very solid base for the next bull leg.
We'll see.

 

[oatman]

You should check out the frosts in Brazil. they are more often than not responsible for large rises. 1975 was one of the worst.
http://www.coffeeresearch.org/market/frosthistory.htm
Trying to predict them is a lottery :cheesy:

 

[PeterTT]

I have been long of the Dec03 coffee fut since mid september at 62.50 after its 3 large sell says from just over 72.00 .. i am only looking for 67.50 as a short term punt .. long term (about 6 months in my terms!) this looks like a good base building area (rounded bottom!) so i would only play this from the long side. I have traded mine through www.finspreads.com as I cannot access the futures market directly.

Good Luck
Peter

 

[bgold]

In Coffee it seems that Oatman's quote applies! Considering the basing pattern of KC, I agree that one should trade it with long bias.
However, gaps down like yesterday do not help gaining confidence. Where do you put your stop? Below 62.80, the low of last week and matched yesterday?
March contract retraced marginally less than Dec! See attached graph. A positive signal?

Still I struggle to determine:
1. entry level (confirmation of yesterdays' highs)
2. Effective stop
3. Target (above 70.00?)

Any suggestions?

 

[PeterTT]

I have only very small part of my capital in this sub 2pct as I am only looking for short term try at 68. If you can afford a long stop and were looking at a 6 month time frame I would go long around here (63 ish) with a stop below 55 and t/p on half at around late 70s and then ratchet up a trailing stop profit to keep you in for any further spikes up. As you can tell my style of trading is not necessarily as technical as some .. I hate drawing loads of lines etc on graphs as I find it confuses the "shape". Just looking at Iansheps chart and you can see if it goes below 55 you have a heads + shoulders type formation from early 2002, whereas if it closes and ranges above 70 you are completing the base building with probable extension back into the 80s seen in mid 2002.


Peter

 

[DaveT]

Has anybody noticed the long term BULLISH MOMENTUM DIVERGENCE on the monthly KC Coffee chart?

Price has remained flat or falling whilst momentum has been rising since mid-2001.

Long term divergences can last a few years, ofcourse, but the longer the pattern, the more significant the move.

I would look for a fundamental catalyst and a short-term technical sign to go long this market within the next 12 months.

Any thoughts?

 

[oatman]

I believe you're looking for a frost

 

[DaveT]

Posted in error

 

[DaveT]

Posted in error.

 

[DaveT]

Fundamentally, there are a number of things that could trigger a major rally.

Frost, drought, diseases or a potential or actual dock stike are the main factors.

My point is the chart is telling you to EXPECT an upturn.

Some commentators suggest there is a domino effect spreading through the commodities markets and coffee will follow in time.

 

[PeterTT]

David, I agreed anyone who has got the ability to hold a long term view and is looking at your chart has to be a buyer at these levels .. I am out at the moment as I got nervous and sold at 64.00 but I am looking to get back in. I agree with the idea that a domino effect is happening in all USD priced commodities. It is just another effect from the US Treasury trying to weaken their currency.

Peter

 

[oatman]

It probably is a buy, but can you watch it 20c against you and for how long.
Obviously ,timing and entry point are paramount.

 

[bgold]

Coffee bottoming? Again??

"Coffee: Grounds for a Jolt Higher" is heading of a bullish article on Coffee.
www.lind-waldock.com/edu/newsletter/210/art02.shtml

KC is hitting contract (KCH4 @ 5970) and multi-year lows on uptick in volume and what seems an increase in Open Interest. It seems to me no signs what so-ever of a pending reversal!!

As always, keen to hear the expert view?