ICE Coffee Holds Support, Short-Term Range -- Technical Analysis

Kira Brecht

  ICE May coffee approached spike low support from March 24 in early action Wednesday, but buying

emerged near the intraday lows and support is holding for now. In the very short term, ICE May

coffee remains range-bound between resistance at $1.8105 and support at $1.6600.

ICE May coffee recently traded down 150 points to $1.7375 a pound.

  The coffee market remains in a corrective phase following the sharp price runup throughout

February and into mid March. From the Jan. 28 low at $1.1555, ICE May coffee soared to a high at

$2.0975 on March 12. From there, a swift corrective pullback ensued, which stalled at the March 24

spike low at $1.6600, which is now the bottom of a short-term range trade.

  The shorter-term moving average outlook has weakened in recent days. The May contract is now

trading under its 20-day moving average at $1.8680, which is a bearish position. The market is

testing the 40-day moving average at $1.7499 on Wednesday. Sustained declines under the 40-day

moving average would be a weak signal to the trend following crowd.

  For now the market remains in a corrective phase to the February-March rally and coffee is

vulnerable to additional declines. Traders should watch the $1.8105-$1.6600 range closely. A

sustained downside breakout under support would signal a continuation of the recent corrective

pullback. Next downside supports and targets lie around $1.6290 and then $1.5175, which represent

50% and 61.8% Fibonacci retracements of the late January-mid March rally move.

  On the flip side, if the bulls manage to sustain gains back above $1.8105 that would be a positive

short-term signal and would suggest the market has found a demand area.

  The market chalked up a major market move in the first quarter and it wouldn't be a surprise to

see a period of consolidation or "backing and filling" as the market adjusts to its new higher price

levels.