Cocoa

[DaveT]

Cocoa-a-go-go!!! :-0 :-0

Nothing moves a market like WAR.....and unfortunately it's civil war in the Ivory Coast which has caused this massive spike in prices.

Now the French are involved, it's looking very ugly down there...Ofcourse, it may not restrict supplies, but FEAR is the driving force here., IMO

I'm not in, but watching with great interest....

 

[bgold]

While one should not look back in trading, the cocoa rally was quite a shocker. This is because there was a clear wave count pointing to a possible rally. As matter of fact I partipated in 2 false starts, losing a little, but decided to hold off only todays before the latest gap up! Too bad!

If indeed wave 3 is in force, current rally can be projected to 2100 where wave 3 = 1.618 x wave 1. A brave man who dares to step in!

 

[DaveT]

OK. Here's my analysis for cocoa long-term, intermediate and short-term.

Long-term
--------------

In a previous thread (April 2004) I presented the long-term outlook using monthly and weekly charts - looking for long-term support @ 1250-1300., and projecting an ultimate long-term target of 2900. (see Monthly chart)

Support held at 1300 and we moved higher in July/August 2004, ( to 1750),followed by a retracement to 1400. From there we have recently exploded to the upside on renewed unrest in the Ivory Coast, touching resistance @ 1800. Volatility is now high.

I have TWO long-term charts below.

1) The 40-year monthly chart (amended) showing long-term breakout of downtrend and projecting 2900 as upside objective.

2) A QUARTERLY LOG chart showing a (nearly complete) CUP-AND-HANDLE patterm, wich is long-term bullish.

 

[DaveT]

INTERMEDIATE-TERM-
-------------------------------

The Weekly Log chart shows the support @ 1400, resistance @ 1800, 2000, and 2400 (old highs)

 

[DaveT]

SHORT-TERM
--------------------

I've used the daily continuous log chart here.

A simple depiction of another possible cup-and-handle formation is shown. The 'handle' could extend down to the 50% retracment level (shown in red) @ around 1600.

Basically, if prices hold within this range, it supports a move higher through resistance @ 1800 to new highs.

To enter from here, I would do one of the following :

1) look for the 50% retracement, coupled with a correction in MACD back towards the 0 line (but not below)
or
2) Buy a breakout of the pattern to new highs.

 

[DaveT]

News sources today seem to suggest the Ivory Coast Govt. are preparing another attack on the northern rebels.......Most French nationals (and other europeans) have been evacuated

Interesting times in the Cocoa (and the Coffee) - I believe both these commodities are starting out on a major bull run during the next few months, fundamentally (and fear) driven.

Ultimately profiting from this situation will be as challenging as ever , ofcourse. These are very volatile commodities at the moment.....

 

[Moneycat]

Fudamentals should point the market lower: cocoa is arriving to the main ports and is being processed for subsequent export.

 

[DaveT]

MoneyCat -

A correction lower at this time would present a good buying opportunity, in the low 1600's, IMO.

See my analysis above.

 

[oatman]

There are gaps to 1490 area.

 

[DaveT]

Oatman - acknowledged, but the WEEKLY gap @ 1638-1665 is of greater significance right now. If that holds as support, we can bottom here.

If it fills, the lower daliy gaps are targets, IMO.

 

[DaveT]

Here's the WEEKLY with gaps highlighted -

 

[bgold]

Here's the WEEKLY with gaps highlighted -

Looks like the weekly gap will be filled today. On LIFFE, cocoa is anothe 1.5% lower and appears to be on course to closing the early november rising window (gap) on daily chart. Using Jap cndle interpretation, filling of windows is bullish while one should be "en garde" if windows get closed! Close of bullish window (like CC) is defined as a close below the High of the candle prior to break-out. Therefore a close below 1643 (ref march05 contract) might indicate that bears are regaining control. While filling the window but not closing inside the candle prior to window/gap, suggests that trend in direction of the gap/window remains in tact.
See a CC example of Sep 2003 (NB I am always a little suspicous of the eSignal contiuation data)

 

[Moneycat]

MoneyCat -

A correction lower at this time would present a good buying opportunity, in the low 1600's, IMO.

See my analysis above.

History teachs us that nothing new comes under the sun...

Two years ago, when Ivory Coast was split in two and each part was fighting fiercely, cocoa ketp arriving at the ports. The final figures showed that the campaign was quite normal by quantity.

Price collapsed at the first announcement that the parties were starting peace talks.

Now the situation is IMHO even simpler: there is no civil war, just followers of the president Gbagbo fighting against the french army.

Buying now, means accepting the fact that prices could fall suddenly.

 

[bgold]

History teachs us that nothing new comes under the sun...

Two years ago, when Ivory Coast was split in two and each part was fighting fiercely, cocoa ketp arriving at the ports. The final figures showed that the campaign was quite normal by quantity.

Price collapsed at the first announcement that the parties were starting peace talks.

Now the situation is IMHO even simpler: there is no civil war, just followers of the president Gbagbo fighting against the french army.

Buying now, means accepting the fact that prices could fall suddenly.

I am tempted to agree with THE cat. Similar to coffee, it appears that commercials (eg insiders who have their people on the ground in Yvory coast) ar increasing their net short position. I wouldn't want to go against them.

As we speak, CC H5 is trading at 1625, therefore rising window has been filled and might get closed. I would consider a bullish position if later today prices retrace todays' decline and close above 1648. You can be guaranteed that I will be long if it looks as if that will be happening. However, at this stage are think odds are low. I suspect CC is goig to test Oatman's 1512-33 basis March rising window.

 

[DaveT]

Yes, a big breakdown from the get-go today - gapped open lower and fell sharply.

It is often said that politically inspired moves end quickly - but I wonder if this is just a 'lull' in the unrest - after all, the French have just lead the biggest european evacuation of an African country since the Congo crisis nearly 10 years ago.....

BGold - I agree that the closing of the weekly window (gap) would point lower still.

I appreciate your point about the position of the commercials - but look at this COT chart (weekly) including ratio histograms for Commercials, Large specs and small Specs.

Look at the area at the beginning of 2002, after the breakout higher. Commercials initailly increased net short position, then gradually reduced and turned net long as prices slowly climbed. I'm not saying the same thing will happen here, just an interesting historical point of reference.

 

[bgold]

Yes, a big breakdown from the get-go today - gapped open lower and fell sharply.

It is often said that politically inspired moves end quickly - but I wonder if this is just a 'lull' in the unrest - after all, the French have just lead the biggest european evacuation of an African country since the Congo crisis nearly 10 years ago.....

BGold - I agree that the closing of the weekly window (gap) would point lower still.

I appreciate your point about the position of the commercials - but look at this COT chart (weekly) including ratio histograms for Commercials, Large specs and small Specs.

Look at the area at the beginning of 2002, after the breakout higher. Commercials initailly increased net short position, then gradually reduced and turned net long as prices slowly climbed. I'm not saying the same thing will happen here, just an interesting historical point of reference.

As always very insightful to see your long term perspective. May I ask were you get these charts from? Futuresource?

 

[DaveT]

COT analysis courtesy of :

www.ccstrade.com

 

[DaveT]

March 05 Cocoa -
----------------------

Looking for support at the daily trendline @ 1525-1530, which is upper end of the gap from 1480-1530.

See my analysis :

 

[DaveT]

I suspect Cocoa is a buy down here : See March chart.

Also note a close over 1600 today gives a weekly key reversal.

NY closed until Monday - short covering ahead of long weekend as traders nervous over what could happen in the Ivory Coast in the next few days.

 

[bgold]

I suspect Cocoa is a buy down here : See March chart.

Also note a close over 1600 today gives a weekly key reversal.

NY closed until Monday - short covering ahead of long weekend as traders nervous over what could happen in the Ivory Coast in the next few days.

For what it is worth; I just bot 1/4 position on break of yesterdays' high, filled at 1605 (HOD!!).
1. I like the reversal pattern which looks as end of a wave 4
2. CC H bounced off some good support as shown on your chart.

Reason to play it small is that I am afraid I still don't like the large shorts by Commercials and TA wise the recent top might turn out to be a 6day island top. There is also still the 1512-33 gap to be filled. Also various indicators do not give very convincing signals.

Anyway, fingers crossed, stop just below the recent low. (I suspect I won't be the only one with his stop there?). I guess I now have to hope for an escalating security problem in Ivory Coast (no a very ethic thought), which is IMHO sort of the the only reason why CC could go up.