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Bob Palmerton
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Mr. Palmerton has over 25 years experience in Corporate Finance, holding positions as CFO, Director of Finance, Financial Management and Analysis roles for Fortune 500 and multi-national firms (ADP, Honeywell, BOC Group) as well as early-stage growth companies. Mr. Palmerton has raised equity... More
My company:
Baseline Analytics
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Baseline Analytics
  • Is JO (Coffee ETN) Going To Zero? 0 comments
    Jun 16, 2013 11:59 AM | about stocks: JO, DBA

    As a market technician, I cannot help but marvel at how some price patterns exhibit parabolic euphoria or parabolic gloom. Looking at the iPath-Dow Jones IBS Coffee ETN (NYSEARCA:JO), I can't help but speculate how low this price will go. I'm still drinking my 4 cups per day and I haven't seen any coffee shops close lately.

    (click to enlarge)

    Weather is clearly the factor for the weak prices, as favorable conditions in Brazil, Vietnam, Columbia all transpire to yield a bumper crop.

    What is interesting is the Commitment of Traders report from this Friday. The Commercials (the smart money we will call them) have continued to reduce their short exposure. As seen in the chart below, the ratio of short to total open interest for coffee futures and options is at its lowest point since 2006 (the blue dotted line).

    Note the coffee weekly chart below. When the COT ratio was at its mid-2006 low, coffee prices began to recover and resume their uptrend.

    (click to enlarge)

    Based on the COT report and the slaughter that JO has been through since its peak in the Spring of 2011, it may be worth speculating on a price recovery of this commodity.

    Please visit Baseline Analytics for blog updates and to learn more about our TrendFlex market indicators.

    - Bob Palmerton, Baseline Analytics

    Stocks: JO, DBA
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