Softs

Cocoa Futures Finding Support as Economies Re-open

Posted 05/21/2020 8:06AM CTPeter Mooses

Looking at the July cocoa chart, traders could see the contract has found support. The move higher has been a grind, but prices above 2400 may be here to stay in the short-term. Technically, the chart is showing resistance has been broken and a new consolidation range has been found. A close above 2440 is needed to have the momentum continue.

Fundamentally, production levels have been lowered due to crop issues. Rainfall has been scarce after output was already affected by dryer than normal conditions earlier this year. Traders have been waiting for a pullback in supply to help boost prices. The bulls have also anticipated the demand in cocoa to gain ground and it appears to be moving that direction. As parts of the world re-opens and the global equity markets try to recover losses from the past few months, the “food” commodities are following the trend. Cocoa demand should grow as more locations find the new “norm.”

Traders should have patience and look at key technical levels and supply and demand indicators to decide which path to take on trades.

Cocoa Jul ’20 Daily Chart

Peter Mooses

Follow Peter on Twitter @PMoosesRJO. Peter's interest in trading began during a college internship with Bunge North America on the floor of the Chicago Board of Trade, where he assisted commodities traders and performed market research and analysis. Upon earning a B.A. in economics from the University of Iowa, Peter served as an analyst, transaction manager and team lead in the Global Trust Divisions for LaSalle Bank and Bank of America, where he managed transaction activity in multi-million dollar client fixed income and asset-backed securities portfolios. After years in the banking industry, it became apparent that Peter's real passion lies in futures trading. He joined RJO Futures because he enjoys the analytical aspects of futures trading and appreciates the economic impact that commodities have across all markets. Peter believes in utilizing market analysis and trends to help clients achieve balance between risk and return, while always keeping their investment objectives top of mind.