Technical Analysis #C-COFFEE : 2017-04-20

Return of El Nino is bullish for coffee prices

Rising temperatures point to possibility of El Nino return, which may negatively affect coffee crops. Will coffee prices continue rising?

World coffee production is expected to recover this season unless ocean temperatures again rise later this year, enabling the return of El Nino. A return of El Nino will raise the possibility of coffee shortages again, though currently there is an oversupply as producers have plentiful stocks despite lower crop last year. Concerns El Nino may return as rising ocean temperatures point to increasing likelihood of such event are bullish for coffee prices.

Coffee

On the daily chart COFFEE:D1 is rising after trading with negative bias since mid-January. It has breached above the 50-day moving average MA(50).

  • The Parabolic indicator gives a buy signal.

  • The Donchian channel is tilted upward, indicating an uptrend.

  • The MACD indicator gives a bullish signal.

  • The stochastic oscillator has breached above the overbought zone which is a bearish signal.

We believe the bullish momentum will continue after the price crosses above the upper Donchian bound at 145.89. It can be used as an entry point for a pending order to buy. The stop loss can be placed below the last fractal low at 139.46. After placing the pending order the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (139.46) without reaching the order (145.89) we recommend cancelling the position: the market sustains internal changes which were not taken into account.

Technical Analysis Summary

Position

Buy

Buy stop

Above 145.89

Stop loss

Below 139.46

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