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Fibs, Waves, Momentum, Sentiment, Outside QUARTER Warn of Major Coffee Base

Posted 06/27/2019 8:07AM CT | RJO Market Insights

Coffee Sep '19 240 Min Chart

Mon and Tue’s impressive gains are consistent with our major base/reversal count and reinforce the navigation of the end of early-to-mid-Jun’s correction discussed in 21-Jun’s Technical Blog.  Tue’s break above 04-Jun’s 106.16 high in the then-prompt Jul contract shown in the daily log active-continuation chart below resurrects the uptrend from 07-May’s 87.60 low that we believe may only be the embryonic stages of a base/reversal process that could be monstrous in scope.  The Fibonacci fact that this month’s sell-off attempt retraced 50% of May-Jun’s 87.60 – 106.15 rally reinforces this bull market correction.  And this is only the first of a number of very interesting Fibonacci relationships that contribute to what could be a major base/reversal environment.

As a result of this week’s resumed rally, 19-Jun’s 96.25 low serves as an obvious key risk parameter from which longer-term players can objectively rebase and manage a still-advised bullish policy and exposure.  Shorter-term traders with tighter risk profiles are advised to use 21-Jun’s 102.75 (suspected minor 1st-Wave) high as our new short-term risk parameter to bullish exposure.  Per a more immediate bullish count, a failure below 102.75 would jeopardize the impulsive integrity of that count and defer or threaten that specific bullish count.

Coffee Daily Chart

 

Coffee Weekly Chart

On a much broader scale, a number of bullish factors warn of a base/reversal-threat environment that could be huge in scope, including:

  • the market’s failure thus far to sustain early-2019 losses below 10 YEARS of former support from the 100-area that should have then held as new resistance
  • bullish divergences in both daily and weekly momentum that broke AT LEAST the downtrend from Oct’18’s 125.50 high
  • threatening bullish divergence POTENTIAL in MONTHLY momentum (confirmed above 125.50)
  • an arguably complete and major 5-wave Elliott sequence down from Nov’16’s 176.00 high
  • historically bearish sentiment/contrary opinion levels not seen since 2001
  • an “outside MONTH up” last month
  • the Fibonacci fact that the decline from Nov’16’s 176.00 high was virtually identical in length (i.e. 1.000 progression) toOct’14 – Jan’16’s preceding 225.50 – 111.05 decline.

Coffee Monthly Chart

  • the market’s rejection thus far of the immediate area around the (89.34) 61.8% retrace of 2001 – 2011’s secular bull market from 41.50 to 308.90 on a quarterly log scale basis below
  • an “outside QUARTER up” this quarter.

These technical facts listed above are compelling and unique and warn of a base/reversal-threat environment that we believe could be monstrous in scope.  On such a major scale it is obviously still VERY EARLY in this base/reversal PROCESS so it would be premature to CONCLUDE a major, multi-quarter or even multi-year reversal higher at this juncture.  But until and unless this market weakens below at least 19-Jun’s 96.25 (suspected B- or 2nd-Wave) low needed to threaten this count, traders are urged not to underestimate this market’s upside potential.

These issues considered, a bullish policy and exposure remain advised with a failure below 102.75 required for shorter-term traders to step aside.  Long-term players remain advised to maintain a bullish policy and exposure with a failure below 96.25 required to negate this call and warrant its cover.  In lieu of such weakness, further and possibly prolonged, accelerated gains are expected.

Coffee Quarterly Chart

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