ICE Coffee Futures (KC) Technical Analysis – August 25, 2016 Forecast

December ICE Coffee futures spiked higher on Wednesday, but sellers came in as the market approached key resistance areas. The selling pressure was strong enough to produce a closing price reversal top. The price action clearly demonstrates where the resistance is and that the market is trading inside a clearly defined short-term price range.

The wild price swing in the market on Wednesday was attributed to general volatility in other soft commodity markets such as orange juice and sugar. Traders also said the early rally was supported by concerns that cold weather in southern Brazil could diminish the outlook for next year’s crop in the world’s largest producer, though most downplayed the extent of the threat.

Technically, the main trend is down according to the daily swing chart. The trend will turn up when the August 8 main top at 147.90 is taken out. Yesterday’s high at 147.80 and subsequent sell-off shows that sellers came in to defend the downtrend.

The main range is 157.65 to 137.85. Its retracement zone at 149.05 to 151.10 is the primary upside target. A downtrending angle at 150.40 passes through this zone, making it a valid upside target also.

The short-term range is 137.85 to 147.80. Inside this range is a minor 50% level at 142.75 and a major 50% level at 141.50. This area is currently being tested. Buyers are going to try to form a potentially bullish secondary higher bottom. Sellers are going to try to drive the market lower, making 147.80 to 147.90 a key resistance area.

The key angles to watch come in at 143.85 and 143.15. Holding over 143.85 will indicate the presence of buyers while a move under 143.15 will indicate the presence of sellers.

A sustained move under 143.15 will indicate the selling is getting stronger. Taking out 142.75 could trigger a further break into 141.50 and the uptrending angle at 140.85. This is the trigger point for an even steeper break into an angle at 139.35.

Look for an upside bias to develop today on a sustained move over 143.85 and a downside bias on a sustained move under 142.75.

If this develops into a “weather market” then expect higher volatility and the potential for wild price swings.  If we return to normal market conditions then look for downside pressure to continue because the supply/demand situation is bearish.