Commodity Chart of the Day
Daily Cocoa
(Click to enlarge)
In the last three weeks cocoa prices have depreciated 10% to drag prices near 2012 lows. As one can see from this chart the last three times cocoa prices have traded near current levels support has held and we've seen appreciation. Past performance is not indicative of future results.
After trading commodities for years you recognize there are a number of relationships between certain commodities. There is a strong correlation to the British Pound and inverse relationship to the US dollar. The fact that I feel the greenback is due for a correction and the Pound is due for a bounce would also support a rally in cocoa. I expect the trend line to hold on a closing basis and to see a trade back near the down sloping trend line approximately 8-10% higher than current levels the coming weeks.
My suggested play would be to get long futures with stops below the recent lows of some type or back ratio spread as an options strategy in September.
Risk Disclaimer: The opinions contained herein are for general information only and not tailored to any specific investor's needs or investment goals. Any opinions expressed in this article are as of the date indicated. Trading futures, options, and Forex involves substantial risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
