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Mo Failure, Sentiment, Fibs Conspire on Coffee Bottom, Favorable R/R Buy

Posted 11/10/2017 12:24PM CT | RJO Market Insights

In yesterday’s Technical Webcast we discussed the importance of 02-Nov’s 130.95 high in the now-prompt Mar contract as a very tight but pivotal one, the break above which could ignite a base/reversal environment that could expose extensive gains thereafter.  The 240-min chart below shows this morning’s break above 130.95 that breaks at least the short-term downtrend and, most importantly, confirms 01-Nov’s 124.80 intra-day low as one of developing importance and our new key risk parameter from which any non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.

Coffee 240 min Chart

 

Coffee Daily Chart

There’s no way we can conclude a major base/reversal threat from only smaller-degree proof of strength.  That’s mixing scales.  HOWEVER….the following technical facts contribute to a very unique and compelling base/reversal-threat argument on a major scale that could result in steep, extensive gains in the weeks and months ahead:

  • today’s confirmed bullish divergence in daily momentum (above and below) from
  • the extreme lower recesses of not only this year’s range, but also the past 2-1/2-YEARS’ range we’ll discuss below amidst
  • historically bearish sentiment levels typical of such m,ajor base/reversal environments AND
  • the Fibonacci fact that the decline from 15-Sep’s 144.85 high close came with five ticks of equaling (i.e. 1.000 progression) Aug-Sep’s preceding 149.80 – 131.35 decline in length.

Coffee Daily Chart

 

The weekly log active-continuation chart below shows the market’s proximity to the extreme lower recesses of the 2+ year range amidst historically bearish sentiment levels, this contrary opinion component of which has become relevant and applicable following today’s admittedly short-term mo failure but one that nonetheless identifies a reliable low and risk parameter at 124.80 from which any non-bearish decisions can be objectively based and managed.

In sum, traders are advised to neutralize all previously recommended bearish exposure and move to a new cautious bullish policy and position from at-the-market (131.10) OB with a failure below 124.80 required to negate this call and warrant its cover.  In lieu of such sub-124.80 weakness further and possibly extensive, multi-week or even multi-month gains are expected.

Coffee Weekly Chart

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