Short-Term Bearish Behavior in Cocoa as We Await More Grinding Data

July 19, 2018 1:28PM CDT

After the release of the European grinding data, cocoa traded in a 200-point range on July 16 and closed at 2406. The data showed a 7.3% gain in European grindings and would be normally viewed as a bullish release but instead we saw the opposite. Longs liquidated, profit taking took over the market. Technical support levels were broken and since the release we have seen NY September futures trade as low as 2288 as of Thursday afternoon. A continued close below the 9-day moving average will continue to hurt the technical side of the trade. The positive side of the European data is it shows demand is coming back for cocoa which has been something traders have been waiting for. The question now is supply better than anticipated?

The market is in a “wait and see” approach as the North American and Asian grindings will be released later this week. The North American data which will be released after Thursday’s close should be in line with Europe’s data. More positive demand news should lead to a rally next week – and if the technicals can take this market higher again. El Nino is also in the back of some trader’s heads. If weather comes back into play, supplies can be hurt further and could help cocoa futures head back to 2500.

Cocoa Sep '18 Daily Chart

Cocoa Sep '18 Daily Chart

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

The risk of trading futures and options can be substantial. Each investor must consider whether this is a suitable investment. Past performance is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that RJO Futures believes to be reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgement at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.

Distribution in some jurisdictions may be prohibited or restricted by law. Persons in possession of this communication indirectly should inform themselves about and observe any such prohibition or restrictions. To the extent that you have received this communication indirectly and solicitations are prohibited in your jurisdiction with registration, the market commentary in this communication should not be considered a solicitation.