Will Cocoa Prices Continue Falling?
IFC Markets | Jun 22, 2017 06:55AM ET
Improved Cote d'Ivoire crop forecast bearish for cocoa prices
Cote d'Ivoire cocoa harvest is expected to rebound without El Nino re-emergence. Will cocoa prices continue falling?
The Australia Bureau of Meteorology joined the US National Weather Service predicting little chance of El Nino developing during the second half of 2017. Earlier this month the US lowered the likelihood of El Nino emerging between October and December to 36% from 46% previously predicted. With no drought developing as El Nino re-emergence fails to materialize, Cote d’Ivoire crop will rebound after weaker 2015/2016 harvests negatively affected by 2016 El Nino. Cote d’Ivoire accounts for 41% of global cocoa production. Higher global supply is bearish for cocoa price.
On the daily timeframe the COCOA: D1 has been falling after hitting year to day high in late March and has fallen below the 50-day moving average MA(50).
- The Parabolic indicator gives a sell signal.
- The Donchian channel is tilting lower, signaling start of downtrend.
- The MACD indicator gives a bearish signal.
- The Stochastic oscillator is in the oversold zone, which is a bullish signal.
We expect the bearish momentum will continue after the price breaches below the lower Donchian bound at 1901.00. This level can be used as an entry point for a pending order to sell. The stop loss can be placed above the the fractal high at 2107.00.
After placing the pending order, the stop loss is to be moved to the next fractal high, following Parabolic signals. By doing so, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (2107.00) without reaching the order (1901.00), we recommend canceling the position: the market sustains internal changes which were not taken into account.
Technical Analysis Summary
Position - Sell
Sell stop - Below 1901.00
Stop loss - Above 2107.00
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.