Bullish forces stepped in to take control coffee prices over the past couple of weeks, most likely due to a tighter supply outlook for the upcoming Vietnam crop. This short-covering rally pushed up past the 50-day moving average with strong momentum (and even gapped higher on the open on October 8th). The long-term supply/demand outlook is bullish, but for the time being, expect that the gap from October 8th will likely be filled. Bullish traders should consider initiating new long positions when said gap is filled and a subsequent pullback to the 107 level is complete.
On the technical side, a rally through the 50-day moving average (and subsequent pullback to the 107 support level) was in fact bullish, complete with follow-through buying that lead December coffee prices to challenge the lows from July of this year. Consider using put options to take a bearish position and manage risk effectively.
Coffee Dec ’18 Daily Chart
