Comment: Since mid-September bullish momentum has picked up considerably so that front month Cocoa futures are in a position to challenge last year’s high at $3385 per metric tonne. Price action since then is seen as ‘triangle’ consolidation, in what might be a complex Wave 4 of a long term rally that started in 2001. While some might feel it is already overdone at these historically lofty levels, we view this as the next stage of a very broad upward-sloping channel and favour a break to new highs. One of the reasons for this lies in the fact these contracts are not overbought and nor have they been for a very long time. It would also put the long term trend back at the centre of the Andrews ‘pitchfork’. The measured target is at least $3600, then the psychological $4000 and possibly the all-time high of $5375 of August 1977.
A weekly close below $2750 would force us to review.
