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Commodity Chart Of The Day

Daily Cocoa

(click image to enlarge)

This is a market that is not on every trader's radar, but when I follow cocoa, I think of all the chocolate we eat. With Halloween around the corner, I figured it would be appropriate to touch on cocoa prices.

In the last five weeks, followers should have enjoyed a ride lower, as I forecast a bearish trade and the market delivered, falling 13% in that time frame. As one can see, the down sloping trend line has served as stiff resistance, but I expect a penetration of that line in the very near future. The green line, identified as the 200 day MA, has held the last four sessions but as the greenback trades lower, we should see appreciation in cocoa accordingly.

Stochastics also indicate an oversold market, so as traders cover shorts and December futures penetrate 2450 on the upside, we should see a whipsaw that lifts this contract to 2550/2600, in my opinion. I like the idea of bull call spreads for option traders, or for those trading futures, get long futures and sell out of the money calls 1:1, targeting the aforementioned prices in the coming weeks.

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.

Source: Commodity Chart Of The Day: Cocoa