The recent price action in coffee offers a number of lessons in market analysis as the market has undergone a classic short squeeze following a long-term downtrend and net short commitments of trader’s reports.

Pictured below, the break of the trendline corresponding with the previously mentioned downtrend can be seen with the pronounced price action Friday, continued on Tuesday, and up to this point Wednesday morning.

While there are a number of other outside market forces such as the currencies of producing nations such as the Real of Brazil, it is also interesting to note the strength of this market and others, while the U.S. Dollar has gained strength.

Also noteworthy is the range of these strong days compared to the others pictured below. While the market spent a good amount of late September below $1, it also spent mid-August to mid-September downtrending from $1.10 to the lows near $0.95, although, it has shot up from the $1 level to $1.10 within a week.

Longer term traders may be looking to consider a bottom while those interested in a shorter time frame may be interested in the market’s high today coinciding with the technical price action from early August and the lower trade since.

Coffee Dec ’18 Daily Chart

Coffee Dec '18 Daily Chart

Michael O'Donnell

Mike started his career in the markets on the floor of the Chicago Board of Trade as a trade checker for a local market maker in the Dow Futures pit. This led to interning with an independent introducing broker and going on to work with a number of market participants including: speculating clients, hedge clients, introducing brokers, futures commission merchants, commodity trading advisors, proprietary traders, trading educators, system creators, and a number of international financial market participants.