Sergey Kamenshikov, Ph.D.
IFC Markets
Cocoa edges up despite news
The cocoa prices continued to grow after the Presidential elections on Sunday in Côte d'Ivoire. This African country is the world leader in its production accounting for the 35% of the global market. The incumbent Alassane Ouattara, who previously was the IMF managing director, has won the elections. According to the reports, the opposition recognized the elections as valid. The majority of the market participants were anticipating the correction down in case of the valid elections. Nevertheless, we see that has not happened yet. Will cocoa prices continue to grow?
Since the beginning of the year the cocoa has already climbed 10%. Consumers are concerned about the possible negative El Nino effects on its crops. The international agri-business group Olam International estimated the global cocoa deficit for 2015/16 season at 150 thousand tonnes. The reading is much higher the previous forecast by International Cocoa Organization for the deficit to be 96 thousand tonnes. Meanwhile, according to its estimates, the global cocoa production will increase to 4.25bn tonnes from 4.19bn tonnes in 2014/15 but the global demand is to increase even more which can cause the cocoa beans deficit. The scenario is yet possible as the prices are edging higher regardless of the news. Meanwhile, the shipping volume of cocoa beans from Côte d'Ivoire ports from October 1 to October 25, season 2015/16 amounted to 214 thousand tonnes which is 30% more than 164 thousand tonnes in the same period of the previous season (last year). The cocoa shipping from Brazil in the period from May to October 25, 2015 increased 3%, or 4.2 thousand tonnes.
Cocoa
On the daily chart PCI Cocoa:D1 is within the uptrend. All indicators give the buy signals. RSI is close to the overbought zone. The bollinger bands have contracted which may signify lower volatility. The bullish momentum may develop in case the PCI surpasses the last fractal high and the Bollinger Band at 3256. This level can serve the point of entry or we can wait till the price surpasses the upper Bollinger Band. The initial risk limit is possible below the last fractal low and the Parabolic signal at 3106 or below the 200-day moving average line, second fractal low and the Bollinger Band at 3027. Having opened the pending order we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 3106 or at 3022 without reaching the order at 3222, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Buy
Buy stop above 3256
Stop loss below 3106 or 3022
The cocoa prices continued to grow after the Presidential elections on Sunday in Côte d'Ivoire. This African country is the world leader in its production accounting for the 35% of the global market. The incumbent Alassane Ouattara, who previously was the IMF managing director, has won the elections. According to the reports, the opposition recognized the elections as valid. The majority of the market participants were anticipating the correction down in case of the valid elections. Nevertheless, we see that has not happened yet. Will cocoa prices continue to grow?
Since the beginning of the year the cocoa has already climbed 10%. Consumers are concerned about the possible negative El Nino effects on its crops. The international agri-business group Olam International estimated the global cocoa deficit for 2015/16 season at 150 thousand tonnes. The reading is much higher the previous forecast by International Cocoa Organization for the deficit to be 96 thousand tonnes. Meanwhile, according to its estimates, the global cocoa production will increase to 4.25bn tonnes from 4.19bn tonnes in 2014/15 but the global demand is to increase even more which can cause the cocoa beans deficit. The scenario is yet possible as the prices are edging higher regardless of the news. Meanwhile, the shipping volume of cocoa beans from Côte d'Ivoire ports from October 1 to October 25, season 2015/16 amounted to 214 thousand tonnes which is 30% more than 164 thousand tonnes in the same period of the previous season (last year). The cocoa shipping from Brazil in the period from May to October 25, 2015 increased 3%, or 4.2 thousand tonnes.
Cocoa
On the daily chart PCI Cocoa:D1 is within the uptrend. All indicators give the buy signals. RSI is close to the overbought zone. The bollinger bands have contracted which may signify lower volatility. The bullish momentum may develop in case the PCI surpasses the last fractal high and the Bollinger Band at 3256. This level can serve the point of entry or we can wait till the price surpasses the upper Bollinger Band. The initial risk limit is possible below the last fractal low and the Parabolic signal at 3106 or below the 200-day moving average line, second fractal low and the Bollinger Band at 3027. Having opened the pending order we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. The most risk-averse traders may switch to the 4-hour chart after the trade and place there a stop-loss moving it in the direction of the trade. If the price meets the stop-loss level at 3106 or at 3022 without reaching the order at 3222, we recommend cancelling the position: the market sustains internal changes which were not taken into account.
Position Buy
Buy stop above 3256
Stop loss below 3106 or 3022
This overview has an informative character and is not financial advice or a recommendation. IFCMarkets. Corp. under any circumstances is not liable for any action taken by someone else after reading this article.
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