Bears Getting Cocoa For Christmas
?? Fundamentals
The Grinch stole Christmas for Cocoa bulls, as prices have fallen to lows not seen since mid-November, as producer selling has stymied any rally attempts. Cocoa supplies are continuing to move out of the growing areas of West Africa and on to ports to be possessed for the export markets.
Though this season’s Cocoa supplies are running behind last year’s totals, weak demand from Europe, due to the continuing economic slowdown on the continent and a stronger Euro, continue to weigh on prices, despite signs of stronger demand from American end-users.
Many traders report some hedge selling of next season’s crop from Ivory Coast producers, which may be signaling that growers expect production to rebound in the 2013-14 production cycle.
A quick look at the most recent Commitment of Traders report shows both large and small speculators lightening-up on their net-long position, having shed nearly 4,500 contracts the week ending December 11th. Prices have fallen since the report, and it appears likely that additional long liquidation selling may occur should prices fail to hold at recent lows.
?? Technical Notes
Looking at the daily chart for March Cocoa, we notice support gave way at the 200-day moving average (“MA”).
The 14-day RSI has turned weak, with a current reading of 38.10. The July 11th low of 2294 is seen as near-tem support for March Cocoa, with no significant chart support found until 2200. Resistance is found at the recent high of 2453.
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