December cocoa futures continue to move higher as we head into the weekend. The market is trading above 2600 and appears to be building on this recent rally, but for how long? The techincals are at a key point right now, if they can break and hold above 2635, last week’s highs are back in site. The market is feeling overbought though. COT data will show where trader’s minds are after the close.
The fundamentals are telling a much different story. Production numbers are high, demand is still low. If cocoa sees record production data, prices will move lower – possibly retesting 2450 again. If demand stays weak, those levels are very realistic in the short-term. With Covid-19 restrictions coming back into play, numbers surging in all parts of the world and no sign of slowing down, prices in cocoa will most likely turn lower again. Traders should look at puts in the December or March contracts.