Coffee futures gapped up strongly today in response to an apparently constructive Commitment of Traders report on Friday, showing Speculators holding a net long position under 10,000, way below the 17,000 that was expected. Some traders talked of "deceptive" COT data because of a large physical position of a major fund who is effectively long, and not included in the COT data. Some have discounted this story as being old news. Must have been Cutten buying the actual Beans!
there is something called the 28% phenomenon that I have found to always work. It works with stocks and commodities. Usuallly when a commodity or stock wants to breakout in a new bull trend, it will make a 27-30% move higher. Then after that you get a nice retracement to the downside, and that is your dip to buy. So far the spot Coffee price has shot up a little more that 30% off of the low in November. This is very bullish to me. I will be anticipating a 40% to 70% retracement, then I will buy it.
Thanks for sharing your experience Reitberg. I've been trading Eurodollar futures on the floor in Singapore for 5 years now. Returns have been good, but the signs are obvious that electronic trading is going to take over. Thus, I'm eagerly embracing the future and have a lot to learn. One of the biggest dilemmas I'm facing is how to add on to existing long positions in a bull market, i.e coffee. I'll try out your method. Cheers.
Here's some alternative commentary on Coffee by the folks at MakeTradeFair.com. I'm not sure if I agree with their politics but it definitely shows the extent of the depressed coffee market. I learned of this site by watching Coldplay perform on the MTV Europe awards. The lead singer was wearing a MakeTradeFair.com T shirt and had the words written on his hand. Who knew you could get commodities trading ideas watching MTV? http://www.maketradefair.com/stylesheet.asp?file=16092002163229
Those Fair Trade people sound like a bunch of communists. YOU NEED PEOPLE TO SHORT COFFEE!!! YOU NEED GREEDY PEOPLE TO SHORT COFFEE!!! WHY? BECAUSE YOU NEED THE PEOPLE, WHO WERE SHORT, TO BUY BACK THEIR SHORT EXPOSURE!!! Then smart people like ourselves can buy into the short squeeze.
DDRX Is DDRX a good proxy for coffee futures? I'm looking at the monthly charts on DDRX and the monthly continuous contract in coffee futures...The two charts look almost the same. What you guys think?
Reitberg - You are right on that communist remark. When I first read this site my heart really went out to these farmers. They are really in a precarious position. Coffee bean prices are low so what do they do? Plant more to try to make up their income on volume. What does that do? Sends more overcapacity into the system and drives prices lower. Now if a situation like that isn't a valid basis for trend following in the ag markets I don't know what is. What I drew from this situation though was the true beauty of perfect capitalism. It is the only system (theoretically) where you can hedge out your own oppression. If Kraft is oppressing these poor farmers and making such a great gauranteed profit why don't these farmers buy stock in the company they are helping fuel the profits of? Become your oppressor and you no longer will be oppressed. Capitalism is the only system which allows you to do this. Now granted this is only a theoretical exercise. I doubt most bean farmers have the capital to invest in the stock market and I doubt Datek accounts are ubiquitous on the plantation. That being said as a collective they might be able to secure a large enough loan, some international support, and enter into some kind of hedged trade. Interesting thought. This also brings to mind the interesting effects of some large CTA's throwing their weight around in a trading room somewhere and favorably or adversely impact the lives of thousands of people around the globe. More interesting from a chaos viewpoint than a moral one. That's a discussion for another day though....
Can you say "contrary indicator"? "The coffee farmers of Latin America are suffering the worst crisis in a hundred years. I urge everyone concerned with this growing misery to read this report. I hope you will use it to promote action to stop the scandal of hard-working coffee farmers falling further into poverty because of the price which the transnationals pay." - Raul del Aguila, Junta Nacional del Cafe de Peru (Peruvian Coffee Farmers' Organisation). "The urgency of the coffee crisis cannot be overstated. The International Coffee Organisation welcomes Oxfam's campaign which makes an important contribution to this search for solutions." - Nestor Osorio, Executive Director, International Coffee Organisation. "If a few companies were less greedy, the people at the bottom would have a lot more. We can do our bit by pressuring politicians to change this insanity, and by buying Fair Trade coffee. I hope people will back Oxfam's campaign to Make Trade Fair." - Chris Martin, UK rock band, Coldplay"
Yeah Cutten, That's exactly why I got bullish on Coffee. I saw that everybody was talking about Coffee oversupply. This is so bullish in coffee, it is going to rip up big time. So what about that DDRX? No, I'm not talking about Dance Dance Revolution Extreme. I'm talking about the coffee stock.
Are you also SUPER BULLISH on OJ, cause there is a huge oversupply of orange juice concentrate as well!