ICE Coffee Coils Within Tight Range -Technical Analysis

Kira Brecht

  ICE September coffee futures were slightly weaker Thursday, but the market was consolidating

within recent ranges.

  Following the Aug. 1 bearish reversal, which defined $2.0740 as major resistance, the coffee

market has settled into a short-term neutral range and coiling type of action is seen.

ICE September coffee recently traded down 45 points at $1.8480 a pound.

   In the very short term, strong overhead resistance lies at $1.9545, the Aug. 4 daily high and

important support is seen at $1.7940, the Aug. 8 low. That range has confined ICE September coffee

action since Aug. 4.

  It would take a rally through that initial resistance area to turn the near-term outlook back to

bullish. Or, on the flip side, a retreat under support at $1.7940 would open the door to a retreat

back to the lower end of the larger multi-month trading range.

   Daily Bollinger Bands have narrowed in recent days reflecting a decrease in overall market

volatility. The daily chart pattern doesn't reveal a strongly trending market right now. This is a

market that is searching for direction.

  The 14-day relative strength index, a widely watched momentum indicator, has turned sideways and

hit the 54% area Thursday, which is a neutral mid-range reading. Momentum also reveals a lack of a

strong trend.

   For now, 20-day moving average support at $1.8293 is holding up September coffee. The September

contract has been trading above that moving average since July 23. A sustained push under the 20-day

moving average would be a near-term weak signal.

   If the bears pressure the market below the 20-day moving average and the Aug. 8 daily low at

$1.7940, the coffee market will be vulnerable to slippage toward support at the $1.6600 area.

Conversely, if the bulls rally the market above $1.9545, the coffee market will be positioned for a

retest of the Aug. 1 high at $2.0740.

For now, the market is stuck in neutral, with choppy, sideways trade seen.