ICE Coffee Bears Target Contract Low - Technical Analysis

Kira Brecht

  ICE Dec coffee futures are failing from a test of resistance at the $1.1800

zone and are falling to lower levels Thursday.

  The longer-term bear trend has been relentless and all counter-trend rallies

in recent months have been shallow and short-lived. The market is within

striking distance of the contract low and the bears will be gunning for a

retest of that floor.

  ICE Dec. coffee recently traded down 150 points at $1.1435 a pound.

  On the downside Dec coffee futures scored their most recent contract low, in

a series of fresh contract lows in recent months, at $1.1320, hit on Oct. 1.

Following the touch of that new low, coffee shifted into a consolidative and

corrective phase. But, upside action was limited to $1.1795.

  A pattern of lower lows and lower daily highs is seen on the daily chart in

recent months. While the bears have been relentless in recent months, downside

momentum has been lacking. Each time the market edges to a new contract low, a

corrective or consolidative phase follows. The bears lack strong momentum for a

strong new selling wave lower.

  Let's take a look at the new contract lows since late June. On June 20, ICE

Dec. coffee fell to a new contract low at $1.2050, but then corrected higher

and consolidated until the August 1 new contract low at $1.1815 presaged

another multi-week correction. Next significant stop lower was the September 5

low at $1.1525, which was followed by a modest upward correction. Then, the

next contract low was seen at $1.1395 hit on Sept. 18, before the most recent

low at $1.1320 on Oct. 1.

  The bears continue to dominate action. But, the trend is lackluster, and a

lack of strong downside follow-through is evident.

  Overall, action has been choppy, but remains dominated by the bull's failure

to extend upside corrections. Rallies are consistently used as selling spots.

  If Dec. coffee continues to follow this pattern, which has been unfolding for

months, a brief dip to a new contract low is possible near term. But, from

there, another corrective phase could unfold slightly higher.