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ICE Coffee Futures (KC) Technical Analysis – December 8, 2016 Forecast

By:
James Hyerczyk
Published: Dec 8, 2016, 09:27 UTC

March ICE Coffee prices continued to weaken on Wednesday despite the weaker U.S. Dollar and the news that Brazilian coffee exports were down to 2.78

coffee-beans-daily

March ICE Coffee prices continued to weaken on Wednesday despite the weaker U.S. Dollar and the news that Brazilian coffee exports were down to 2.78 million tonnes in November, compared to 3.01 million bags a year ago.

Arabica coffee is flirting with bear market territory, having dropped nearly 20 percent from its peak a month ago. Strong Columbian production and the weak Brazilian Real are undermining concerns over tightness in supplies.

Bearish sentiment continued to weigh on prices after growers’ group Fedecafe said Colombian coffee output last month came in at 1.65 million bags – a jump of 25% year on year.

Trump’s policies are seen as inflationary which could drive up U.S. Treasury yields. This would make the U.S. Dollar a desirable currency, putting pressure on the Brazilian Real. When the Real loses value, farmers tend to sell.

Technical Analysis

The market is oversold by all technical analysis measures, however, I watch the charts and I see a downtrend. With the trend indicator, we’re not trying to predict bottoms or tops.

The main trend is down according to the daily swing chart. However, the market is in the window of time for a closing price reversal bottom. So start watching for a lower-low than the previous day and a higher close on an intraday or daily basis.  It’s likely to be a dramatic move coupled with massive volume.

We’ve hit bear market territory but I don’t think investors are going to start selling, I think this news is more likely to attract aggressive bottom-pickers who sense that every last bullish trader has been driven out of the market.

Potential downside targets include the May 4 bottom at $140.25 and the June 13 bottom at $138.85. If this price fails then look for a possible steep sell-off into the next two levels at $128.15 and $126.00.

On the upside, the major Fibonacci level at $146.45 is the first target. This is the trigger point for a possible surge into the major 50% level at $152.75.

daily-march-ice-coffee
Daily March ICE Coffee

Forecast

Based on the close at $141.70, the direction of the market today is likely to be determined by trader reaction to the main bottom at $140.25.

Holding above $140.25 will indicate the presence of buyers. This could create enough upside momentum to challenge a long-term uptrending angle at $145.00 and the major Fib level at $146.45. This price is the trigger point for a possible huge rally into $152.75.

A break below $140.25 will signal the presence of sellers. This could lead to a quick break into $138.85. Crossing to the weak side of the downtrending angle at $137.55 will put coffee in a bearish position. This could lead to a test of another long-term uptrending angle at $135.65.

The angle at $135.65 is the trigger point for a steep sell-off with $128.15 to $126.00 the next targets.

Look for a bearish tone to develop under $140.25 and a bullish bias to develop over $145.45. Watch for a closing price reversal bottom with big volume to trigger the start of a strong short-covering rally.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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