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Back in mid-winter (in Australia) I wrote about a setup on Coffee that provided a nice long trade. Since then I have kept the commodity on my Watch-List, and a potential opportunity to short Coffee has now appeared.
Using the same Highs Resistance Card I used to find support in June, you can see that Coffee prices have slipped below the 50% level and this is now appearing to act as resistance, as illustrated in Chart 1 below:
Chart 1: Coffee Daily Bar Chart with Highs Resistance Card
click to enlarge
Anyone who has attended one of my classes will know that I usually start with the 50% price level on my resistance cards, and then add less significant price levels as required. In the chart above I have included the 1/4s, 1/8s and even the 1/16s of this high. If you look closely you will see that the market has reacted around each of these prices, which suggests this card is worth following.
Chart 2 zooms in on the current ABC short and we can see the next 1/16 price on the Highs Resistance Card sits between the 75% and 100% milestones of the ABC short. If Coffee were to retrace for another day, this would adjust our point C - and subsequently our milestones. We would then check for clusters to use as price targets.
Chart 2: Coffee Daily Bar Chart with ABC Short Milestones
click to enlarge
Chart 3 illustrates how the coffee price has dropped below the $150 level that held the market up during November and early December. Further retracement would encroach on this level, so you should practise your form reading by keeping an eye on the close of each bar.
I have also included some Time by Degrees® harmony with point C, which is also encouraging for our short setup.
Chart 3: KC-SpotV showing Price Support at $150 and Time by Degrees® Harmony
click to enlarge
Next we turn to the swing charts, where we find a clear down-trend in the daily, weekly and monthly charts. However, on the weekly chart (Chart 4), we see expanding up swings and contracting down swings, which can be an indication that a trend is slowing. The latest weekly down-swing is incomplete, so if Coffee prices continue to fall, this could result in an expanding down-swing on the weekly. Alternatively, this could turn out to be a false break to the downside and we would then watch for a break of the November highs before looking for another long trade.
Chart 4: Weekly Swing Chart of Coffee KC-SpotV
click to enlarge
I hope you were able to trade the Christmas rallies. There’s been a great rally on ANZ from late-November and on the SPI from the double bottom formed on 16 November. And to those who’ve been long CBA since September – congratulations!
To all our traders, thank you for your interest this year. I trust that 2013 will be another year of success and happiness.
It’s the Journey
Lauren Jones |