Trade view /
07 July 2016 at 8:38 GMT
Since mid-June, we have had a bullish outlook on the price of coffee, as it has consolidated above the key $139/lb level.
One strategy is to work with a short-term balance on top of the core position. This trade view can be seen as such a balance to the core suggestion from June 15, or as a standalone shorter-term trade.
The price of COFFEENYCont (COFFEENYSEP16) has managed to hold above the two key pivots $133/lb and $139/lb, and, as of yesterday, the latter pivot completed a successful back test, a key reversal on the daily chart. Given the current structure, and the failure by bears to hit suspected time alignments for a halt to the advance on June 27, we continue to have a bullish stance on the short- to medium-term timeframes.
What makes the current situation so interesting is that signals are telling us that the next alignment for a larger peak is now on August 20, which opens the door for the possibility of a third-wave breakout taking the price of coffee way higher and as we have seen in the past, it can move quite fast.
Support for this specific trade view is located at $139/lb and a close below is indicative of a re-test of the $133/lb level. Resistance is located at $151/lb and $156/lb.
Management and risk description
Add cautiously to the core position published on June 15 at market around $143/lb or buy as a stand-alone trade at market around $143/lb for a move higher into $151/lb and $156/lb. The stop is a daily close below $139/lb in either case.
The initial timeframe for the core position was four weeks. If future developments for the price are favourable, that trade view will see an update next week as we might need to extend the timeframe for that trade.
The risk to trading coffee is the volatility and a break and a daily close below $139/lb which would put the immediate bullish prospects into serious question.
Entry: buy at market around $143/lb.
Stop: daily close below $139/lb.
Target: $151/lb and $156/lb.
Time horizon: one week.
COFFEENYCont daily chart
COFFEENYCont daily development chart
Source: Saxo Trader
— Edited by Martin O'Rourke
Non-independent investment research disclaimer applies. Read more