ICE Coffee Spirals to New Contract Lows - Technical Analysis

Kira Brecht

  ICE December coffee futures hit another new contract low on Wednesday, as the

contract tumbles lower for the seventh session in a row. The bears have picked

up momentum in recent days and an increase in overall volatility has been seen.

The trend across all timeframes is bearish for coffee.

  ICE December coffee recently traded down 130 points at $1.1065 a pound. The

contract touched a fresh contract low at $1.1060 Wednesday.

  ICE coffee futures have been trending lower in a long-term bear market off

the May 2011 high at $3.0625, seen on the monthly continuation chart. This

week's sell-off marks an acceleration of the downtrend and reveals newfound

momentum by the bears. Action in recent months has been choppy and sideways,

with little follow-through seen higher or lower. But, action over the last

several days has unfolded with a strongly trending tone. The market has

slightly exceeded lower Bollinger band support at $1.1164 on Wednesday.

  Looking at momentum, the 9-day relative strength index has pushed under the

30% level to 25% on Wednesday. Any reading under 30% is considered oversold.

However, strongly trending markets can remain oversold for days or even weeks.

  On the downside, there is little nearby support for the market. The monthly

continuation chart for coffee does reveal two major bearish objectives ahead at

$1.0330, the March 2009 monthly low and the $1.0170, December 2008 low. Those

floors are key targets for the bears on a multi-day to multi-week basis.

  On the upside, minor resistances lie at $1.1250 and then $1.1335.

  A major resistance point lies well overhead at $1.1795, the Oct. 10 spike

high. The market would need to rally back above that level to improve the near

term technical outlook. That level will likely remain out of reach near term as

the bears have taken charge of the short-term trend.