Commodity chart of the day
Daily Coffee
(click to enlarge)
Outside of natural gas I would venture to say coffee has been one of the worst performing commodities in the last 12 months. My question is that about to change?
Though there have been no significant changes in fundamentals coffee may be establishing a base and be preparing for a bounce. From its highs in September 2011 coffee futures are lower by nearly 50%. Prices are trading just above their lowest levels in 2 years but a base seems to be forming just above the $1.50 level. This is not true just with coffee but generally when a trend reversal takes place you see a volume spike and volatile movement. Both of which have taken place in coffee this week. I don't believe in coincidence and a very real possibility that we experience a jump in coffee short term.
I am expecting a trade back to the 50 day MA; the green line on the chart above and it's possible we see a trade back to the 100 day MA - the blue line if some momentum traders get on board or enough shorts jump off. My advice is back ratio spreads or buying futures while simultaneously selling out of the money calls 1:1.
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.
