Coffee Prices Are Percolating. How Much Higher Will They Go Here?

December coffee futures (KCZ25) present a buying opportunity on more price strength.

See on the daily bar chart for December coffee futures that a price uptrend line is in place and prices this week hit a four-month high. The bulls have the firm overall near-term technical advantage. See, too, at the bottom of the chart that the moving average convergence divergence (MACD) indicator is in a bullish posture as the red MACD line is above the blue trigger line.

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Fundamentally, coffee prices are on the rise. This is due to a supply and demand imbalance in part caused by drought in major growing regions Brazil and Vietnam. Increasing global demand, especially in Asia, has further tightened the supply and demand balance for coffee. Additional bullish elements for coffee include supply chain disruptions, labor shortages, rising production costs and the potential impact of tariffs on imported coffee beans.

A move in the December coffee futures above strong chart resistance at 400.00 cents would give the bulls more power, suggesting more price upside, and it would also become a buying opportunity. The upside price objective would be 480.00 cents, or above. Technical support, for which to place a protective sell stop just below, is located at 360.00 cents.www.barchart.com

IMPORTANT NOTE: I am not a futures broker and do not manage any trading accounts other than my own personal account. It is my goal to point out to you potential trading opportunities. However, it is up to you to: (1) decide when and if you want to initiate any trades and (2) determine the size of any trades you may initiate. Any trades I discuss are hypothetical in nature.

Here is what the Commodity Futures Trading Commission (CFTC) has said about futures trading (and I agree 100%):

Trading commodity futures and options is not for everyone. IT IS A VOLATILE, COMPLEX AND RISKY BUSINESS. Before you invest any money in futures or options contracts, you should consider your financial experience, goals and financial resources, and know how much you can afford to lose above and beyond your initial payment to a broker. You should understand commodity futures and options contracts and your obligations in entering into those contracts. You should understand your exposure to risk and other aspects of trading by thoroughly reviewing the risk disclosure documents your broker is required to give you.

On the date of publication, Jim Wyckoff did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com

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