Hope You Like Your Lattes Iced: How to Play Stumbling Coffee Prices Here

December coffee (KCZ25) present a selling opportunity on more price weakness.

See on the daily bar chart for December coffee futures that prices have dropped sharply recently and then rebounded a bit and are now pausing. This pause is not bullish and a bear flag or pennant pattern may be forming. See, too, at the bottom of the chart that the moving average convergence divergence (MACD) indicator has recently produced a bearish line crossover signal, as the blue MACD line has crossed below the red trigger line. Both lines are also trending lower.

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Fundamentally, coffee futures prices have recently dropped amid improved weather in key growing regions like Brazil, leading to increased coffee supply and has halted the supply deficits seen in recent years. Recent rainfall and a better outlook for the Brazil coffee harvest have eased market concerns and pushed futures prices down.

A move in December coffee futures below solid chart support at 350.00 cents would give the bears more power and it would also become a selling opportunity. The downside price objective would be 270.00 cents or below. Technical resistance, for which to place a protective buy stop just above, is located at 380.00 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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