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Strategic trade
/
Buy
Trade view / 11 January 2017 at 14:19 GMT

Cocoa has an undervalued flavour

Managing Partner / Spotlight Group
United Kingdom
Instrument: CCH7
Price target: 2244
Market price: 2161.5
Background

Cocoa looks to have the best potential among the soft commodities complex for price rises.
In contrast, there are increasingly bearish signals in coffee and cotton prices may have seen the growth opportunity already as the impulsive has been in place since June 2016.

Cocoa for March delivery hit USD 2,121/tonne in New York in late December which was the lowest since March 2013 and as such, despite the negative technical profile, the commodity has the space to improve.

Cocoa
 Source: www.investing.com, Spotlight Ideas    

Of course, I appreciate that there are good initial expectations for cocoa output in Ivory Coast, which is the leader global producer. However, there is potential support to prices from demand.
It is estimated that the cocoa grind will improve and absorb the big supplies due this seasons to favourable processing margins compared to recent years.

AC Nielsen research revealed a late-2016 improvement in US chocolate demand, with market sales up 2% in December, compared with an average growth rate in the July-to-December half of 0.2%.

Coca 5-Year Chart:
Cocoa Source: Spotlight Ideas

Management and risk:

Parameters: Cocoa USD/tonne (CCH7) March 2017

Entry: Buy 2161.50 (1352 GMT)

Targets: 2199 ... 2244 ... 2317

Stop: 2010

Time horizon: Strategic


— Edited by Clare MacCarthy

Non-independent investment research disclaimer applies. Read more
12 January
vanita vanita
Great call Steve 👍it's rocking...
17 January
Philidor Philidor
I should start copying you every time you write something on commodities that piques my interest, because I swear, every time I look at your trades in commodities, you're winning :)

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