Technical Special: ICE Coffee Bulls Try to Carve Out Minor Low

Technical Special: ICE Coffee Bulls Try to Carve Out Minor Low

Kira Brecht

ICE March coffee futures closed higher for the second session in a row

Thursday. The market has been trading lower in a long-term technical downtrend,

but Wednesday saw a bullish reversal day form on the daily chart. For now,

traders should consider this at most a minor low, within a major bear trend.

But, the bulls have come out in force.

ICE March coffee futures settled 1% higher at $1.5640/pound on Thursday.

Looking at a weekly chart of the March coffee contract, the bears have

dominated market action since the April 2011 peak at $2.8825 high. The market

is in the midst of a major long-term down move.

However, looking at the weekly chart, recent selling action has brought the

market close to the June 2010 low at $1.3805. That represents an important

swing low and strong support. It isn't surprising that some bottom picking has

emerged over the last two sessions.

In the bulls' favor, the March contract did close above the 20-day moving

average for the last two sessions. That level comes in at $1.5441 and will be

important short-term support to watch. If the bulls can maintain gains above

the 20-day moving average, additional upside correction could be seen. Upside

resistance levels and targets lie at $1.5780 and then $1.5970, recent swing

highs from Nov. 19 and Nov. 12, respectively.

A look at a monthly continuation chart also reveals a potential bullish

monthly reversal forming, however that won't be confirmed until the last

trading day of November. Traders should monitor action closely Friday. If

coffee futures remain in positive territory it would confirm that formation on

the monthly continuation chart, which could set up coffee for a multiweek

corrective rally higher.