Bullish Reversal Day Forming On ICE Coffee Chart - Technical Analysis

Kira Brecht

  ICE December coffee futures hit a new contract low early  Thursday, but then

reversed higher. As long as the market closes higher, ideally in the upper

third of the daily range, a bullish key reversal day will be confirmed on the

daily chart.

  ICE December coffee recently traded up 220 points at $1.0370 a pound.

  The ICE coffee market has been in a long-term bear trend. Since mid October,

the pace of the selling has accelerated and a steep downtrend is seen on the

daily chart. From Oct. 15, ICE Dec coffee slid from $1.1765 to Thursday's new

contract low at $1.0095.

  Daily momentum indicators, such as the 9-day relative strength index,

stumbled to extremely oversold conditions, with an 8% reading hit on Nov. 6.

Any reading under 30% is considered oversold. The extreme oversold condition

leaves the market vulnerable to a snap-back corrective rally move at any time.

  While the technical trend across all timeframes remains solidly bearish,

Thursday's bullish reversal suggests the ICE Dec coffee market may have found a

short-term low and it is set up for a corrective rally move. Watch support at

$1.0095, the new contract low. That remains the key floor on the downside.

  On the upside, initial resistance lies at Thursday's high at $1.0520, ahead

of $1.0620 and then $1.0780, which are minor swing highs from the hourly chart.

  Shifting out to a longer-term timeframe, the ICE monthly continuation chart

shows an important low at $1.0170, the December 2008 low, which was an

important bottom on that chart. The Dec coffee contract slightly exceeded that

long-term support zone on Thursday's sell-off.

  Bottom line? The bears could take a pause here near term. The market is

extremely oversold and has touched a long-term support zone from the monthly

continuation chart. All trends remain bearish, but the bullish reversal

formation suggests a corrective move or at least a stabilization and sideways

consolidation trade could emerge short term.