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Mario La Marra In Trading Tactics Issue #128 07 October 2005, I noted a possible double bottom setup in Cocoa which, at the time of writing, is still to come to fruition. This is where the words ‘patience’ and ‘anticipation' are so vital.
This week I am looking at a close cousin to Cocoa, namely Coffee (KC-SpotV). On the weekly bar chart in Chart 1 below I have used a down-pointing arrow to highlight the bear market rally from the December 1999 high at 149.00 to the October 2001 low at 42.20. Running the Gann Retracement tool from the October 2001 low up to the most recent high in March 2005 we can identify areas of support that the market might find as it retreats back from this high. A support area of great significance is the 50% retracement level which the market has just recently tested and, if this support is not broken, the market may have created a new low.
Chart 1
click chart for more detail Taking a closer look at this most recent test of the support around the 50% retracement level on Chart 2 below, we can see that there was only one week that Coffee closed below this level prior to pushing back up. What will be interesting to see is if this is the point where Coffee will reverse its weekly down trend and move into a new bull market rally?
Chart 2
click chart for more detail Coffee trades on the New York Board of Trade (NYBOT) from 9:15 am to 12:30 am (New York time), and is worth $18.75 USD for each 1 point movement (movements are in 0.05 cent increments). The initial margin is $3,080 USD per contract and the current ‘spot’ contract for Coffee is December.
Trade Smart
Mario La Marra
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