Cocoa Bucks Bearish Trend For Commodities
Today’s Spotlight Market
Both large and small speculators in Cocoa futures were lightening up on their net-long positions last week only to see prices soar in the past few trading sessions. The Commitment of Traders report shows non-commercial traders shedding nearly 6,600 net-long positions during the reporting period ending September 16. This long liquidation selling reduced the overall net-position of these large speculative accounts to just over 70,000 contracts. Non-reportable traders, normally small speculators, also saw long liquidation selling last week, and reduced their overall net long position by 655 contracts to stand at nearly 5,750 net-long contracts. ?
Bullish futures traders have had little to cheer for the past several months as a stronger U.S. Dollar and fears of slowing economic growth in Europe and China have triggered an overall bear market in commodities price. One of the few exceptions to the current bearish trend has been Cocoa. Here prices are currently trading near 3-year highs on concerns that the Ebola outbreak that has plagued parts of West Africa, could eventually spread to the major Cocoa growing nations of Ivory Coast and Ghana, and potentially causing disruptions of Cocoa shipments should strict quarantines be implemented. Cocoa prices were already seeing support from strong demand from global chocolate makers and while this season?s Ivory Coast Cocoa production totals were at record levels, traders note that recent Cocoa arrivals at Ivory Coast ports has been lower than expected. Traders should prepare for increased volatility in the near-term as market participants determine what if any adequate ?risk premium? should be reflected in prices should West African Cocoa shipments face disruptions.
Technical Notes? -? View Today’s Chart
Looking at the daily chart for December Cocoa, we notice prices moving ?parabolic? following the recent sell-off that, in hindsight, turned into a ?bear-trap? and forced out weak longs prior to the recent price surge. The 200-day moving average (MA) has acted as a key support barrier throughout most of the 18-month bull market run. We do note that the 14-day RSI has entered overbought territory with a current reading of 73.80. Any price correction could be severe given the steep upward price move the past 7 sessions with yesterday?s ?reversal? potentially triggering some profit-taking selling. 3366 appears to be the next resistance level for December Cocoa, with support seen at the 20-day moving MA, currently near the 3156 price level.
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