I started covering the potential bottom in Coffee futures in late September. That initial post likely came at a very bearish time for sentiment). Coffee was beaten down, but the math for identifying the price pattern said it was worth a shot.
And after holding and forming a bottom, coffee futures prices rallied well into October. But the initial rally became overheated early last week. So I wrote a short-term trading piece on why I thought Coffee futures were set for a pullback. To be clear, I am still bullish on coffee but traders need to mitigate risk by understanding where coffee futures support and resistance levels reside. Commodities tend to be volatile trading vehicles and plans can get disrupted quickly if you aren’t focused on risk disciplines.
Here is an excerpt from last week’s post where I cautioned traders about a pullback (due coffee’s wave structure and alignment with price resistance):
Looking at the chart below, we can see a very symmetrical and balanced form/proportion move from the lows in and around 114.57. I’m going to label the current price action as the end of a 5 wave movement so I would expect weakness ahead for coffee prices.
It’s not so much about being right as it is about using my technique to identify key buy and sell levels (this is how any successful trader mitigates risk – with their given technique/system).
So now that coffee futures are pulling back, let’s identify some potential coffee futures support levels.
Below is an updated chart of Coffee futures, highlighting a few support levels that I am watching. As you can see, it may have a bit further to fall but I still expect it to hold at/around one of the price support levels. That said, traders should exercise caution if coffee futures fall below the .786 Fibonacci retracement level. And it would be bearish (i.e. exit trade) if coffee takes out the September price lows.
Coffee Futures Chart
Stay tuned and thanks for reading.
Twitter: @BartsCharts
Author does not have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
