Dry weather in Brazil has precipitated this aggressive rally, allowing May coffee futures prices to easily clear the 50-day moving average, with the 1.50 level on the horizon. Tight supply outlook, coupled with increasing demand have prompted the May coffee futures prices to break above the February 140 highs, but RSI levels are in extremely overbought territories at this point.

In my last article, I stated that “May coffee has is beginning a reversal up H&S pattern with a break above the pattern’s 1.30 neckline. If this pattern follows through to completion, it carries a measuring objective to 1.39.” This head and shoulder reversal pattern was successfully completed and May coffee now holds support above the last rally high of 1.4045 from February 25th. May coffee will likely retrace back to the 1.40 level before consolidating, which will then determine whether a reversal, or another leg higher will take place.

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Coffee May ’21 Daily Chart

Adam Tuiaana

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.