Technical Analysis: The Trade That May Perk You up Again

As it turns out, Americans still love their coffee.

In December 2016, a predicted surplus coupled with a stronger U.S. dollar, sent coffee prices screaming to a low of $1.42. But it was at that point that coffee hit an unsustainable low with incredibly oversold momentum metrics, including Relative Strength, MACD and Money Flow. 

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That’s when we highlighted the opportunity, only to watch it pivot and run from a low of $1.42 to a January 2017 high of $1.569, as hoped. We also highlighted the iPath Bloomberg Coffee Fund (JO), which was just as oversold.  It would run from $20.19 to a high of $22.60.

However, in recent weeks, the price of coffee has again pulled back, finding double bottom support at $1.424.  What we’d like to see here is a retest of its January 2017 high, as demand picks up and as supply drops.

Forecasts say production may not keep pace with demand by as much as three million 60-kg bags for the next season, according financial broker Marex Spectron, as noted by Agrimoney.com.  Production could fall by 152.6 million bags in 2017-18, down 900,000 a year earlier.  Demand, though is see rising by 1.9 million bags.

That supply-demand equation could force the price of coffee even higher, as well as ETFs like JO.  At the same time, higher prices are seen as a negative factor for stocks like Starbucks (SBUX), which dropped from $58.50 to $54 before recovering.

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Learn Simple, High Probability Setups from Pro Traders. Prove Your 
Mastery of Their Strategies and Get Paid To Trade! Learn How Here

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