Dr. Kris'  Instablog

Stock of the Day: Jumping on the java jolt
The coffee ETF (JO) has been grinding its way down for over a year, losing more than 50% of its value. Its chart has shown strong historical support at $36. Last week it hit that level and promptly reversed course.

Today, the stock has jumped nearly 5% which is a huge move for this issue. As I'm unfamiliar with the vicissitudes of the coffee market, long-term investors should do their homework before jumping in (this should go without saying), but today's strong move on heavier than normal volume indicates that folks are believing this rally.

There are options on the JO but they are very thinly traded and should be avoided by all but the most savvy options traders. The stock is nearing $40 minor resistance (you can wait for it to clear this to be on the safe side) and it will face significant resistance at $42.50. Don't forget, though, that the stock was $80 a little over a year ago. A reasonable target based on technicals is $57.50, an area of major support/resistance. An appropriate stop-loss price would be just under $36.

Risk level: Moderate to conservative