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.

Arabica Futures Bounce From More-Than-7-Year Low

NEW YORK  -  Arabica-coffee futures edged higher Thursday morning as some

traders took profits from bets that prices would continue to fall after the

market settled at a more-than-seven-year low last session.

  Arabica futures have been under pressure recently as growers in Central

America and Colombia bring in their harvests, following back-to-back bumper

harvests from No. 1 producer Brazil.

  Arabica coffee for December delivery on the ICE Futures U.S. exchange was

recently 0.6% higher at $1.0210 a pound, up from a fresh more-than-seven-year

intraday low of $1.0095 a pound.

  The International Coffee Organization, a London-based trade group, expects

global arabica-coffee supplies to outpace demand by four million bags in the

season that began Oct. 1. Those supplies should continue to pressure prices in

the near-term, traders and analysts said.

Coffee Futures Tumble to More Than Seven-Year Low; Sugar Slips

DJones - Leslie Josephs

  NEW YORK  -  Arabica-coffee prices slid to the lowest level in more than seven

years as growers in Central America and Colombia bring in their harvests amid

tepid demand from roasters.

  Arabica coffee for delivery in December fell 1.9% to $1.0150 a pound, the

lowest close for the most actively traded contract since Sept. 14, 2006, on the

ICE Futures U.S. exchange.

  Prices for arabica beans, which comprise the majority of world production,

have tumbled 29% this year as a second bumper crop from top grower Brazil hit

international markets. The latest drop is fueled as the harvests from Central

America and Colombia add to already ample supplies.

  The International Coffee Organization, a London-based trade group, expects

global arabica-coffee supplies to outpace demand by four million bags in the 12

months that began Oct. 1.

  The price drop for arabica has rattled growers, who say they are producing

the coffee at a loss. The ICO estimates the cost of producing one pound of

arabica coffee beans in Colombia and Central America is $1.10 to $1.15.

  "This year will be the second year in a row that we will have operational

losses," said Juan Pablo Echeverri, who farms 200 hectares of coffee in

Manizales, Colombia. "At these prices, the effects on the state of the coffee

plantation will be disastrous."

  Also driving prices lower are expectations of another big crop from Brazil

again next year. Flowering, an indication of the size and health of next

season's crop, has begun. "The flowering in Brazil was very good," said

Christian Wolthers, president of Wolthers America, a Florida-based importer of

central American and Brazilian coffee.

  But despite the price drop, roasters aren't rushing to buy beans.

  "The incentive isn't there to buy out too much," said Tom Isaia, president of

Coffee Express Co., a roaster based in Plymouth Township, Mich. "There's risk

involved."

  If prices fall further, roasters could be stuck with more expensive stock,

Mr. Isaia said.

  "If we knew that in September of 2014 coffee would be 40 cents more a pound,

you'd see everybody stumbling all over each other to buy some," he said.

  In other markets, raw sugar for March delivery fell 0.9% to 18.10 cents a

pound, the lowest settlement since Sept. 27.

  "The main pressure seems to have been the weakening real," said Michael

Liddiard, senior vice president at New York-based Agrilion Commodity Advisers

LLC. The Brazilian currency hit an eight-week low against the U.S. dollar in

intraday trade Wednesday.

  The weaker currency in Brazil, the No. 1 sugar and coffee grower, encourages

exports of the commodities because producers receive more reais back for their

crops sold abroad in U.S. dollars.

  Orange juice for January delivery ended up 1.2% at $1.2475 a pound, the

highest settlement since Oct. 14. Cocoa for delivery in December closed 0.2%

lower at $2,730 a ton, while cotton for December delivery settled 1.5% higher

at 77.07 cents a pound.