ICE Coffee Coils in Triangle-Like Pattern -- Technical Analysis

Kira Brecht

  ICE July coffee futures have been consolidating and "coiling" within a triangle-like pattern on

the daily chart since mid-April.

  Triangle patterns are generally continuation patterns, but sometimes can act as topping

formations. Technical indicators reveal a weak outlook for the coffee market and the bulls appear to

be losing steam.

ICE July coffee recently traded down 35 points at $2.0190 a pound.

  Looking at action in recent weeks, since mid-April, ICE coffee has carved out a range between

major support at $1.8850, the April 16 low, and resistance at $2.1900, the April 23 daily high.

  Triangle trendline support can be drawn off the April 16 and April 29 daily lows. That trendline

offers support around $1.9836 on Wednesday. If the bears were to press the July coffee contract to

two consecutive settlements under that trendline, it would be a negative chart signal.

  This week, ICE July coffee has dipped under its short-term 20-day moving average, which is a

bearish sign. That level comes in at $2.0461 on Wednesday and has now become resistance for the

market. The bulls would need to recover back above the 20-day moving average to improve the

short-term technical view.

  Daily momentum studies have generally been trending lower in recent days and reveal a lack of

strong bullish momentum.

  On the downside, there are several key chart support zones to monitor near term. First, the

triangle trendline around $1.9836, then 40-day moving average support at $1.9538 and finally,

$1.8850, the April 16 low. If the bears succeed in breaking coffee under these support zones in the

days ahead it would be a weak chart signal and would open the door for a potentially significant

multiday to multiweek decline.

  Overall, the multimonth trend outlook remains bullish, with the strong rally in February and

March, but recent action has taken on a consolidative and corrective tone. The bulls need to defend

those support levels to prevent a potential selloff near term.