Cocoa big drop 15:30 yesterday

Discussion in 'Ag Futures' started by benwm, Mar 2, 2011.

  1. benwm

    benwm

    Anyone see that drop yesterday in Cocoa around 15:30 from 3700-ish down to 3227 and then back up again?

    What happened?
     
  2. Shagi

    Shagi

    Fat Finger

    That's what normally happens when prices move too far away from the TRUE supply & demand situation.

    In this case - Cocoa there is plenty of supply available, the move up is simply fear of an ARTIFICIAL tight supply situation because of political instability in Ivory Coast. There is plenty of beans out there heck even Ghana is stepping up.

    If prices reflected the TRUE supply & demand situation Cocoa should be in a bear market. But then markets don't give a rats ass about that.

    Thats why its difficult in my opinion to marry fundamentals with trading decesions based on price as in the moment. At some point in the future prices will collapse to line up with fundamentals.
     
  3. benwm

    benwm

    Thanks Shagi

    Wish I'd been working some orders below..
     
  4. Anything south of 3400 was busted.

    ICE has a horrible policy of playing Monday morning quarterback on spikes, you can get jerked around on a winning trade through no fault of your own.
     
  5. Some dude may be trying to corner the cash market in cocoa. The spike was an attempt to "flush" him out. :eek: :D
     
  6. Il Principe

    Il Principe Guest

    You marry fundamentals with spreads. There may be supply out there, but if it's not quality, front months will be bid higher hoping fresh-off-the-boat cocoa is better or "blendable". If CdI is falling apart & ships aren't sailing out of the largest producer, then the premium for higher quality Ghana is probably thru the roof, not to mention fuel surcharges from >$100 oil. But if you trade flat price, lotsa luck. It's like an electric yo-yo.
     
  7. TraDaToR

    TraDaToR

  8. heech

    heech

    I heard from someone in the pit that a drop in a cocoa-related ETF/ETN preceded the plunge in the future... so it might be whoever is running the ETF that blew this thing up.

    Just passing on unsubstantiated fifth-hand rumors!