Coffee Traders' Forum - A Discussion about Coffee Futures Trading
Coffee Traders Discussion Forum
It seems to me that this pattern that has been developing for quite some time in coffee portends a big trade in the direction of the break out.
Either this pattern breaks up or breaks down from this wedge pattern. These kinds of pattern completions lead to large volatility expansion moves.
The current bullish COT positioning, apparent bullish change in fundamentals (smaller Brazil crop and excessive moisture problems with the soon to be harvested Vietnam crop) tips the scales to a 4th quarter break out to the upside.
I have also shown the on balance volume which has now broken a well defined downtrend line going back to the 2012 highs suggesting a bullish trend in money flowing back into the coffee futures market. That would also suggest a bullish break out of the completing wedge pattern.
The Exponential oscillator buy signal gap is narrowing and would not take much more of a move to signal a bullish long term technical turn.
This is a quarterly chart and by no means is this meant for short term trading. But for those that have a longer term positional persuasion or are more hedging oriented, then this chart is one to pay attention to.
Much will happen between now and the 4th quarter but is is interesting that this pattern completes during the key flowering/blooming phase of Brazil’s next coffee crop development.
Certainly the gravity of having a good flowering season this fall goes without saying for the bear case to remain valid.
The other is a chart of exporter ending stocks expected for the next crop cycle including US green coffee stocks as it relates to usage when compared to all prior years since 1995.
We are approaching the 2010/2011 lows which set the lowest levels since 1965 and caused the big bull move in coffee to over $3/pound.
Every year is different and no two are the same but with supplies relative to usage approaching and possibly setting new 50 year lows...should Brazil's coffee crop next year come up short of the 60 million bag estimate then the upside would seem to offer something more lucrative than normal.
As always it is in God's capable hands.