ICE Coffee Consolidates Above Support -Technical Analysis

Kira Brecht

  ICE May coffee futures have stabilized in recent days as 40-day moving average support stalled the

corrective selling pressure off the March 12 price peak. Very short-term, the trend outlook is

neutral as the market consolidates in a tight range.

ICE May coffee recently traded down 85 points at $1.7515 a pound.

  Looking back at market action in recent months, ICE May coffee bulls staged a strong rally move

off the late January low. The market climbed from the Jan. 28 low at $1.1555 to a high at $2.0975 on

March 12. Amid overbought conditions, the coffee market succumbed to a corrective pullback and

profit-taking and plunged to the March 24 daily low at $1.6600, which nearly coincided with 40-day

moving average support, at $1.6606 that day. The market rebounded and has been consolidating in a

tight range since that session.

   The March 24 session emerged as a bullish outside day formation on the daily chart, which

suggests a minor low has been found, at least for now, at the $1.6600 low, which is major short-term

support. On the upside, minor near-term resistance lies at $1.7940, the March 26 daily high. Those

are the two key levels for traders to monitor in the short-term.

   The rising 40-day moving average remains important support to watch as well and it comes in at

$1.7043 on Thursday. The market has been trading above the 40-day moving average since Jan. 29. The

moving average is sloping higher and rising each day. The willingness of the market to "bounce" from

a test of that level on March 24 is a positive signal.

  The market has seen volatile trading in February and March and a period of sideways consolidation

wouldn't be a surprise as coffee digests the recent action.

  However, if support at $1.6600 were to give way, it would open the door for additional declines,

with 50% retracement support of the February-March rally around $1.6250.

   On the upside gains through $1.7940 would be a positive signal, and could open the door back

toward the $1.8500 zone.

   Momentum isn't showing a strong signal currently and the coffee market may need some time to

"back and fill" near current levels.