Coffee Prices Oversold, Ready to Bounce

Americans still love their coffee.

But prices have soured as traders predict a surplus, instead of a deficit. 

That, coupled with a stronger US dollar has sent coffee prices from a November 2016 high of $1.76 to $1.42.  Despite rising consumption, favorable Brazilian weather conditions are pointing to a stronger than expected harvest for the New Year.

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Not many companies are complaining about the decline, though.

Starbucks (SBUX) for example watched its stock soar from $51 to $51.93 in recent weeks on the idea it’ll see a boost to margin growth.  However, we are seeing signs of a near-term bottom and potential reversal to the upside despite the negatives.

The decline to prior support has created an obscenely oversold situation for coffee, especially among our technical indicators, like MACD, RSI and Money Flow.  In fact, all three are all greatly oversold in unsustainable territory.

That being the case, it only stands to reason for traders to look for a near-term bounce. 

Upside may not last long, but a short-term opportunity is presenting itself.

The chart of the iPath Bloomberg Coffee Fund (JO) is a mirror image of coffee, too.  It’s just as oversold and ready to reverse to the upside.  Dead cat bounce or not, it appears ready to move.  Look at how over-extended it is to the downside just using MACD, RSI and Money Flow.

That’s not sustainable at that price.  A bounce to the upside appears to be in the cards.

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Build a Positive Equity Curve.  
Then Get a Funded Account up to 250,000 USD! Learn How Here

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