Coffee about to get sucked down to 111? My sense is that coffee is about to get sucked down to the 111 level after making a break below recent lows and the relatively weak recent price action as well as the strong volume on sells seen on the 3rd and 30th of January, 12th and 16th of February as well as the most recent negative signal on the 15th of March. My biggest concern is the best entry level which is a conundrum I frequently face. This conundrum is: do I act on the initial signal further away from a reasonable stop or do I wait for a retracement that possibly does not arrive and I miss the trade. The market has been in a downtrend for over a year since November 2016. The price has made only two approaches to the 200 day moving average and has been drifting sideways or lower for the last year so opportunities to get short have been limited on that basis. The 100 day moving average has provided more opportunities but with approximately 8 to 10 cents as the gap between the two average is the risk reward is not acceptable given I'm only targeting 111 on the downside from 118. I think I've just talk myself out of this trade. I will monitor and hopefully get a chance to sell from the 200 day moving average further down the track.
Cocoa price sees the rush for the exit Big correction yesterday after a couple of days of consolidation and perhaps an obvious top looking at the rounding nature of the last 3 days price action. I was thinking about taking profit early in the session but the price kept on moving towards 2560 so I left it, only to see the price reverse by the end of the session. My instinct is will probably see another big down session perhaps after an attempted rally near the open tonight. I will look to take off at least half of my position probably more and I am regretting not taking off half of it last night partly because I thought about doing it and I was happy with the gains I'd made on the trade so far. It's a long way back to the short and medium term moving averages so I can't wait for that drop to see if they hold there and will just have to accept the missed opportunity. Still the overall result sounds good my account is up about 400% in total, mostly as a result of this trade so now the focus is just trying to find a similar opportunity or perhaps a better way to say it is I just need to focus on waiting for a similar opportunity. I also thought in a way that the benefit of staying with the trend and waiting for the 'end when it bends' (as Ed Seykota says) is that I got much larger in terms of position size than I otherwise would have and therefore the net benefit of waiting is still positive. Staying with just a single unit would have resulted in about $6k whereas the actual result was $16k. The rally in total went much further 'in a straight line' than i expected, so overall I'm probably still ahead by choosing to take the extra risk (let it run) than judge when it will drop before it drops (predict a top). Still thinking the 'satisfied with returns' is a good barometer of when to take the trade off so long as it has exceeded required risk/return criteria for overall model to work.
Cocoa provides an opportunity to exit and I jumped. After the big negative signal on Monday, a rally which I half expected might occur for the bulls to re-establish the up trend provided my exit opportunity. I was watching the opening of the session pretty closely and lucky for me it more or less moved higher - otherwise it would have forced my hand to liquidate around 2420 I guess. I couldn't take much more on the downside. The price rallied all the way to 2515 at which point I was pretty happy with my overall result so I tried to exit the position not realising I was still on delayed data for that exchange and my stop order was filled at 2498 on one account and 2488 on the other account. I was pretty pissed at the fill and sent them a trade cancellation ticket trying to report an issue, at which point they explained I missed that I was on delayed data. Even allowing for that f*** up, the overall result was not too bad and I just need to be patient enough to wait for another opportunity as clear cut as this. Where to next for cocoa ? I'm not sure is the obvious answer but I suppose what I'm really saying is that I'm not sure if the bulls are strong enough to push higher again so quickly after barely taking a breather or whether the price will drop back down towards the shorter term moving averages. Given yesterday's bullish candle could not close above the previous day's high or even the previous day's close I'm leaning towards a drop back down towards the 2300 area. There still only seems to be patchy news out of the Ivory Coast about the actual quality of the crop or the damage done by the dry weather and such speculative markets can certainly reverse quickly if the specs think the fast money / rally is over. Would I go long again back at the 40 day or 100 day moving average? I don't know yet. Probably depends on the nature of the decline, by which I mean if it was a fast and volatile sell off then I don't think I would get involved (spec rally = spec sell off and they'll go looking somewhere else for their next meal) but if it just drifted back and then seemed to be bottoming over a couple of days near the averages then I would be inclined to risk one unit. The sideways price action of the last week combined with the big down day on decent volume is enough for me to take my short term risk off the table. Alternatively if the price continues to rally from here then I might put on another trade but only one unit compared to the 7 or 8 units and I took off last night.
Wheat has a down day but posts a higher low. Wheat posted a somewhat positive day after 3 days of sharp declines. Whilst the open to close was still a down day, my positive takeaways were the higher low and the limited trading range indicating a partial rebuttal to the bears and also showing some indecision. Obviously the overall picture still looks relatively weak based on the last 10 trading sessions or so but going back over the last 30 sessions the picture looks a lot better. So my initial assessment is that this is a corrective phase in a bigger positive move, until proven wrong by the price. Given how many times I've seen the market go through stops at work only then to rebound or sell off and fail, I just use the previous support or resistance / technical analysis as a guide of where the price might turn and then I'm just watching the daily price action for signs of stability to indicate the level is holding. So I'm just going to wait and see how the next few sessions go before making a call to exit.
I need to focus on getting less trade signals - or only take cheap option positions where I have a short term view. I'm looking at a few trades at the moment and thinking for trades where I have a view that I want to express but the location of the current price relative to the support and resistance is not ideal (i.e. too far to make sense from a risk / reward point of view) or counter to a prevailing trend then I should express these via options. This would also have two additional benefits: one is I would avoid getting involved in volatile markets because the option price would be relatively expensive or perhaps prohibitive is a better word for my risk reward. The second is I would limit the emotional investment and have a guaranteed stop loss (the premium) while still being able to get the creative activity of my brain out and be recognised for good analysis which also has positive emotional benefits. It's healthy for my head to say "I knew that was going to happen" and get paid for it. I suppose more to the point and the bigger reason for doing it is not to end up going "I knew that was going to happen", be pissed off that I didn't take any action and then chase another trade that's not really there, doubling my loss and making me more anxious to find a big winner. All of which hurts my risk / return and puts me further away from my goal. Essentially I'm paying the option premium to keep my head more stable. Be satisfied that I've tested all the opinions I've had.
Sugar ends the session down but the bulls are still in the equation The price action on Tuesday was encouraging for my short position however it wasn't a total victory. The previous day's bullish hammer candle had a huge range and the close on Tuesday was only just below the body of that hammer candle - so if I was a Bull I wouldn't be completely dissuaded until the price had erased the whole lower tail of that candle. For now it's just an encouraging sign and we need a few more days and lower price levels before I'll be adding to this one.
IMO everyone should be paying attention to NY coffee. Yes we’ve been in this situation before but it's up against a major lower channel support, desc triangle on continuous front month, and commercials long with everyone else totally short. DX and USDBRL are big factors here. Robusta is the harder read for me though. Also: http://www.iandmsmith.com/news-headlines/coffee-market-reports/coffee-market-report-406
So you're thinking it will put on a decent rally from here? USDBRL is roughly driving sideways for most of last year and i can't really see too much more negative news from brasil actually moving the rate too much. Certainly can imagine USD moving higher on the rate hike scenario/inflation fears, so that would be bearish for the price in USD terms, also make brasilian coffee more attractive to flood the market, no? the commercials being the only ones long is certainly bullish i agree and it seems to have held at this level or thereabouts for a while - where are you looking for on the upside?