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Technical Analysis #C-COFFEE : 20-01-2017 by IFC Markets

Lower Brazilian coffee crop estimates support prices

Coffee output forecast of Brazilian official crop bureau estimates output this year may fall to 2015 levels. Will coffee prices continue rising?
The official Brazilian crop bureau Conab forecasts country’s coffee production this year may fall to levels of 2015 due to a natural factor such as alternate lower yield after higher production years as well as fertilizer shortages. It estimates output in the range 43.7m-47.5m 60 kilogram bags, a decline of at least 3.9m bags from last year's record crop, in its first forecast this year. The harvest in 2015 was the lowest in six years due to a drought. Hedge funds increased net long bets on coffee for first time since November: holdings for arabica coffee surged 60% to 13565 futures and options in the week ended January 10, according to US Commodity Futures Trading Commission. This is bullish for coffee prices.

 

On the daily chart COFFEE:D1 is consolidating after retracing to six-week high on January 12. It bounced off the 50-day moving average MA(50) having breached above it two weeks ago.

  • The Parabolic indicator gives a buy signal.
  • The Donchian channel is tilted upward, indicating an uptrend.
  • The MACD indicator is rising and the gap with the signal line is widening, which is a bullish signal.
  • The stochastic oscillator is falling, edging down from the oversold zone.

We believe the bullish momentum will continue after the price crosses above the last fractal high at 152.69, confirmed also by the upper Donchian bound. It can be used as an entry point for a pending order to buy. The stop loss can be placed below the Parabolic signal at 144.01. After placing the pending order the stop loss is to be moved every day to the next fractal low, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop-loss level (144.01) without reaching the order (152.69) we recommend cancelling the position: the market sustains internal changes which were not taken into account.

 

Technical Analysis Summary

Position Buy
Buy stop Above 152.69
Stop loss Below 144.01

 

Source: http://www.ifcmarkets.com

 

Note
This overview has an informative and tutorial character and is published for free. All the data, included in the overview, are received from public sources, recognized as more or less reliable. Moreover, there is no guarantee that the indicated information is full and precise. Overviews are not updated. The whole information in each overview, including opinion, indicators, charts and anything else, is provided only for familiarization purposes and is not financial advice or а recommendation. The whole text and its any part, as well as the charts cannot be considered as an offer to make a deal with any asset. IFC Markets and its employees under any circumstances are not liable for any action taken by someone else during or after reading the overview.

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