ICE Coffee Languishes, Corrective Pattern -- Technical Analysis

Kira Brecht

  ICE March coffee futures are trading quietly Wednesday as the market

consolidates in a minor corrective pattern following the new contract low hit

early in the month. The short-term outlook is choppy and sideways, but the

longer-term trend remains firmly bearish.

  ICE March coffee recently traded down 25 points at $1.0850 a pound.

  Since hitting a new contract low at $1.0415 on Nov. 6, the ICE March coffee

contract has rebounded higher with a minor series of higher highs and higher

lows. The corrective strength hit a peak at $1.1200 on Nov. 22 and that remains

important nearby resistance for the market. The coffee market has stalled just

below 40-day moving average resistance in recent days, which comes in at

$1.1202 on Wednesday.

  For months now, the 40-day moving average has acted as strong resistance on

minor counter-trend rally moves in the coffee market. While minor breaches have

been seen of the 40-day moving average, they have been short lived. Traders can

continue to look at that zone as strong nearby resistance.

  Daily momentum has flat-lined, with the nine-day relative strength index at

48% on Wednesday. Momentum is neutral and not showing a strong trend.

  Near-term support lies at $1.0615, the Nov. 25 low. If the market took that

floor out the bears would look to push back toward the contract low.

  Overall, conditions are uninspired and volatility has fallen in recent days.

The market is in the midst of quiet pre-holiday trade and liquidity conditions

are likely thin.

  The market is in a corrective phase following the steep and steady sell-off

from mid October. The consolidation could have some more time on the clock.

  Shifting out to the monthly continuation chart for ICE coffee, major

long-term support lies at the December 2008 swing low at $1.0170. That remains

a longer-term objective for the bears. But the market is languishing and not

exhibiting strong momentum, so it may be days or weeks before the bears regain

momentum for a test of lower levels.