Short term
Trade view / 19 July 2016 at 6:08 GMT

Coffee may be too hot, or just brewing nicely

Instrument: COFFEENYSEP16
Price target:
Market price:

The price of coffee (COFFEENYCont, COFFEENYSEP16) is trending higher.

On Friday we experienced a spike higher that found itself suddenly reversed. However, the price  did not hit and reverse off any key pivots on Friday or Thursday last week.

Also, time cycles have been interpreted as incomplete. We could have quite a distance to go yet, and it may be time for another balance trade to try to juice performance on the core position.

A Trade View of that core trade is found here. The previous balance trade worked out nicely and is found here.

Yesterday the drop that started last Friday hit the 145 cents/pound level, which is actually a Gann pivot. It touched down and reversed higher.

Since we are not expecting a larger peak in the price of coffee until around August 18 it is possible that we are in the midst of a third wave higher.

A third wave is the longest and most powerful wave of a five wave impulsive sequence and we would very much like to make the most of it.

Key support for this balance trade is 145c/lb and resistance is now 156c/lb and 163c/lb. Since we last week managed to clear and close above resistance at 151c/lb we should theoretically see this level be taken out once more.

Management and risk description

This setup could be viewed as a stand alone short term setup or as a balance to the core position initiated on June 15. Buy at market but above 145c/lb, the stop is a daily close below 145c/lb and the targets are 156c/lb and 163c/lb.

The risk to this setup is a plunge through the 145c/lb pivot, such an outcome should be able to push price to the 139c/lb level.


Entry: Buy at market above 145c/lb.

Stop: Daily close below 145c/lb.

Target: 156c/lb and 163/lb.

Time horizon: One week

COFFEENYCont daily chart
COFFEENYCont daily chart
COFFEENYCont daily development chart
COFFEENYCont daily development  chart
Source, all charts: Saxo Trader

— Edited by Adam Courtenay

For more on commodities click here         

Non-independent investment research disclaimer applies. Read more
tcat tcat
When looking at the 1hr chart there seems to be a head and shoulder formation, is that of any concern to your outlook?
Kind Regards,
Johan Berntorp Johan Berntorp
A bit, what is a bigger problem is that price appears to make impulses to the downside. Not looking superbright...must catch a bid quite soon.
Johan Berntorp Johan Berntorp
Thanks for the comment tcat! Very interesting now as we for the second time hit the $1.45 level. It appears to hold up for now but as stated earlier we do not like being so close to being tossed out. On the other hand, we may now have successfully re-tested the $1.45 pivot which is on the positive side.
peter peter
Still positive about coffee futures? thanks.
Johan Berntorp Johan Berntorp
I had to stop out this with a loss.
Johan Berntorp Johan Berntorp
Longer term yes, but in the medium term this decline raise questions. Next key support is $139.
24 July
Johan Berntorp Johan Berntorp
I have, due to the disturbing price action Friday taken a re-check on the charts. And my opinion stays firm as to the trajectory which should be up. I can't find any solid cycle arguments for a larger peak in place, in the short we can't rule out more downside yet though. Perhaps we are in a running correction higher, which should eventually lead to a large rally like for example the OMXS30.I from the October lows in 2014. If we are in a running correction the ideal alignment near term for a low occurs this past Friday or August 5.
25 July
peter peter
many thanks!
04 August
Johan Berntorp Johan Berntorp
The bullish reaction today falls into the cycle argument above, very important to get upside traction now. We closed above $1.39 and reacted on August 4, which is close enough to August 5. Very encouraging if we can finally re-claim $1.45...
08 August
peter peter
thanks, is action today technically optimistic?
08 August
Johan Berntorp Johan Berntorp
The optimism is mainly due to the fact that we didn't close below 1.39. For today I am hoping for a break of 1.45 which is a more solid signal for higher prices at this juncture but don't feel too excited at the moment. So, I'd say today's action so far is neither bull or bear yet but it is a positive if we can hold around this level.
09 August
Johan Berntorp Johan Berntorp
Still closing above 1.39, but the feel is it has to take off fairly immediately here...If it does, still 1.45 as important level I have adjusted the time cycles into at least August 21, which appears to be a Sunday and beyond that September 10...
10 August
peter peter


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