ICE Coffee Trend Bearish, But Lackluster -- Technical Analysis

Kira Brecht

  ICE December coffee futures are consolidating at modestly firmer levels

Wednesday, after eking out yet another new contract low on Tuesday at $1.1320 a

pound. Overall action is lackluster and momentum is uninspired, but the bears

continue to chip away at the downside as the multiyear bear trend remains

dominant.

   ICE December coffee recently traded up 30 points at $1.1440 a pound.

   Despite a lack of strong momentum, ICE December coffee prices continue to

erode. In recent months, rallies have been short-lived, merely corrective and

used as selling spots. It remains a slow grind on the downside, with limited

follow-through time and time again after new contract lows are seen, but the

bears remain in control. A pattern of lower daily lows and lower daily highs

remains intact on the daily chart.

   Short-term, the new contract low at $1.1320 offers nearby support. Momentum

is pointing modestly higher from near mid-range levels, which doesn't support a

strong new selling wave currently. Generally, in recent months, once ICE coffee

hits a new contract low, a period of consolidation, or upside correction

emerges. That pattern could unfold again now.

   On the upside, the previous swing high is seen at $1.1920, hit on September

25. That is strong nearby resistance and if the pattern holds, near term

corrective strength will stall shy of that ceiling.

   A look at the monthly continuation chart for ICE nearby coffee futures shows

a relentless bear trend since May 2011. There is no bottom pattern forming as

of now on the monthly chart. There are several bearish objectives seen on the

monthly chart including $1.1150, the July 2009 monthly low, $1.0330, the March

2009 monthly low and then a strong floor at $1.0170, from December 2008.

   The daily chart has shown lackluster momentum in recent months, but despite

the choppy trade, the bears continue to chip away at the downside. Near term, a

minor consolidation period could ensue, but if declines are seen under $1.1320

in the days ahead, the bears will refocus on additional downside targets with

the next stop at $1.1150.

   On the upside, it would take a strong rally and close above $1.1920 and then

$1.2105 to suggest that a minor bottom was forming on the daily chart. But, for

now, the bulls appear to be lacking in momentum and strength.