In the last three months FCOJ prices rose 35% only to be followed up with a decline of 25%. After building what I interpret to a base the last two weeks I think we could see round two of an appreciation. March futures which can be seen in the chart above has closed above its 9 day MA and as of this post is trading near two-week highs. My stance is that we see a trade higher in the coming weeks/months and I?ve advised clients to scale into bullish trade using the Fibonacci levels as your targets on the way up.
As long as we do not see a penetration of the recent lows I would remain in long futures and trail stops on the way up if the market cooperates. As for option trades I would look out to May and July contracts and use multiple legs to allow flexibility. I like the idea of back ratio spreads thinking we could see a tarde15% higher in the coming weeks/months.
I do think we will see a shift in money amongst the commodity players. I do not see traders abandoning the markets that have outperformed of late like metals and energies but I think some of the money when big traders rebalance will find its way into commodities that have underperformed of late. Two sectors that I believe could see some of those assets on a rebalancing are the softs (FCOJ, sugar, cocoa, and coffee) and livestock markets (cattle and hogs).