Coffee Prices Ready To Jolt?
Today’s Spotlight Market
Large and small speculators have been aggressively cutting their net-long positions this past week according to the most recent Commitment of Traders report. For the reporting period ending on July 15th, the combined non-commercial and non-reportable net-long positions fell by nearly 7,200 contracts to 35,017 contracts. Commercials were covering their short positions on the price decline and it would not be a surprise to see Coffee roasters increasing their purchases should it become apparent that the recent price sell-off has run its course.?? ?
Fundamentals? – ? The three-month long bearish price trend for Coffee futures appears to have stalled as traders have once again started to show concerns about the size of the Brazilian Arabica Coffee harvest following one of the worst droughts in decades. It appears that the recent selling pressure due to the ongoing harvest in Brazil has begun to wane, with producers becoming reluctant to sell at current prices in the hopes of obtaining higher prices in the coming months.
The big concern among analysts is how this season?s drought will affect the 2015-16 production season, with the impact of dry conditions on tree flowering as well as new growth from tree branches. These factors can affect Coffee bean production and will become an even bigger factor next season, which is a down year in the Arabica production cycle. All these factors, including prices that are 50-cents per pound lower than recent highs, may entice end-users to become willing buyers to lock-in supplies with the prospects for potentially tighter supplies and higher prices going into 2015.
Technical Notes? -? View Today’s Chart? -? Looking at the daily chart for September Coffee we notice prices resisting a downward test of the 200-day moving average (MA), which currently resides just below the recent lows near the 156.75 price level. This past Friday?s price surge has taken the market back above the 20-day MA, which is adding support to the notion that near-term lows may be in place. The 14-day RSI has turned up and is now reading a more neutral 47.07. We note that Monday?s continuation of Friday?s price rally has found some resistance at the down-trend line drawn from the April highs. Bullish trades would wish to see a weekly close above the trend-line to add confirmation that the bearish move has ended.
————————————————————————————————–
Disclaimers
This article is provided for informational purposes only. No statement in this article should be construed as a recommendation to buy or sell a security or to provide investment advice. The content provided has been obtained from sources deemed reliable but is not guaranteed as to accuracy and completeness. optionsXpress makes every effort to provide timely information to its recipients but cannot guarantee specific delivery times due to factors beyond our control.
Derivatives involve substantial risk and are not appropriate for all investors. Please read the?“Disclosure Statement for Futures and Options”?prior to investing in futures or options.
For investments using a straddle or strangle options strategy the potential loss is unlimited. Multi-leg option strategies are subject to multiple commissions. Profits may be eroded by the commission expended to open and close the positions and?other risks?apply.