ICE Coffee Futures (KC) Technical Analysis – October 3, 2016 Forecast

December ICE Coffee (Arabica) is trading flat shortly before the regular session opening. There was no follow-through to the upside following Friday’s strong reversal to the upside which was fueled by technical factors and Robusta coffee supply concerns.

There is an ample supply of Arabica coffee, but the market is benefitting from the scarcity in the Robusta contract. Robusta yields are being negatively affected by dry conditions in Vietnam and Brazil that are reportedly damaging coffee plants.

TECHNICAL ANALYSIS

The main trend turned down on Friday when the market took out the previous main bottom at $149.00. However, there was very little follow-through to the downside on the move as buyers came in slightly above the previous main bottom at $147.40 and near a major retracement zone. The trend will turn back up on a trade through $154.95.

The main retracement zone is $149.05 to $147.65. The short-term retracement zone is $149.40 to $151.10. The combination of these two zones makes $149.05 to $149.40 the key area to watch. As long as coffee holds above this area we have to say that buyers are coming into support the market.

 FORECAST

BASED ON THE CURRENT PRICE AT $151.20, THE DIRECTION OF THE MARKET TODAY IS LIKELY TO BE DETERMINED BY TRADER REACTION TO THE MAJOR FIBONACCI LEVEL AT $151.10.

A SUSTAINED MOVE OVER $151.10 WILL INDICATE THE PRESENCE OF BUYERS. THE DAILY CHART INDICATES THERE IS PLENTY OF ROOM TO THE UPSIDE WITH THE NEXT TARGET A DOWNTRENDING ANGLE AT $153.90.

A SUSTAINED MOVE UNDER $151.10 WILL SIGNAL THE PRESENCE OF SELLERS, BUT THE BREAK IS LIKELY TO BE LABORED WITH POTENTIAL TARGETS AT $150.15, $149.40, $149.05 AND $148.80.

WATCH THE PRICE ACTION AND READ THE ORDER FLOW AT $151.10 TODAY. TRADER REACTION TO THIS FIB LEVEL WILL TELL US IF BUYERS ARE STILL SUPPORTING THE MARKET OR IF SELLERS ARE GAINING CONTROL.

THE LONGER-TERM FUNDAMENTALS ARE SUPPORTING THE MARKET, BUT THE PRICE ACTIO SUGGESTS THAT A NEW SUPPORT BASE HAS TO BE BUILT IN ORDER TO CREATE THE MOMENTUM NEEDED FOR AN UPSIDE BREAKOUT.