In spite of some recent strength in the US dollar, we’ve seen March coffee prices rally over the last week or so. Many traders are a bit apprehensive about initiating new long positions due to a forecast of significant wet weather headed for major growing areas of Sumatra. We should know more over the next two days. La Nina may be producing some good numbers in Indonesia after a sluggish production.
Technically, we’ve been able to clear a critical high of 14525 from December 20th. This area should have posed strong resistance but since March coffee prices have cleared this area, we’ve seen 5 out of the last 7 trading sessions go positive. In the near term, we could see a strong pullback in the price action, down to this level. We won’t yet call a bottom on a market that has been free falling since November of this year. Traders should look to initiate a buy with a pullback to the 14500 level, use options to allow time, and manage risk.
Daily chart of March Coffee
Source: RJO Futures Pro
Series 3 Licensed
Senior Market Strategist
Adam grew up in Chicago and was always fascinated by the fast-paced action found in the futures market hub there. He began participating in the financial markets by trading stocks in 1997 and began his career as a trading consultant with RJO Futures in March of 2009. At RJO, he specializes in risk management and disciplined trading plans, and is focused on educating clients with one-on-one consulting and training. Adam believes the best approach to trading is to take a measured and objective approach and let the markets guide your decisions.