ICE Coffee Bulls Target Test of Range Top -- Technical Analysis

Kira Brecht

  ICE December coffee is trading sharply higher Tuesday, holding gains above the 20-day moving

average for the second session in a row. The market is bouncing from the bottom of a two-month

sideways trading band. Daily momentum is pointing higher and the bulls are targeting a move back

toward the August and September highs in the $2.1110-to-$2.0995 area.

ICE December coffee recently traded up 435 points at $1.9560.

  Since early August, ICE December coffee has traded in a choppy, neutral trading band defined by

the Aug. 1 high at $2.1110 and the Sept. 2 high at $2.0995 on the upside. On the downside, the lower

region of the trading range is seen at the Aug. 20 low at $1.8285, and then the Sept. 19 low at

$1.7640.

  The mid-September push below $1.8000 was short-lived and used as a buying opportunity. The

recovery from the lower end of the trading range targets a recovery rally back toward the range top.

An initial bullish objective lies at the upper daily Bollinger Band line at $2.0248.

  Looking at momentum indicators, the 14-day relative strength index is rising and supports a

near-term bullish outlook. The RSI climbed to 54% on Tuesday, from a recent low at 38% on Sept. 19.

  The December coffee contract is now trading above the 20-day moving average at $1.8787, and that

zone becomes support for the market. The bulls need to sustain strength above the 20-day moving

average in the short term to keep the bullish objective at the range top in play.

  Declines back under the 20-day moving average, if they were to occur, would be a weak signal and

would show the bulls are losing control.

  Shifting out to the monthly continuation chart for ICE coffee, the picture reveals a strong rally

move to start 2014. Both January and February registered strong gains in coffee prices. Since then,

however, a very large multi-month range has developed between $2.1570 and $1.5780. Those remain the

key long-term resistance and support zones to monitor. It would take a rally through the $2.1570

ceiling seen on the monthly continuation chart from April 2014 in order to unleash a continuation

rally move to the upswing seen in January and February.

  Bottom line? Watch action around the range top on the daily December chart at $2.1110. It would

take a strong breakout above that zone in the days or weeks ahead to suggest the market had

completed its current sideways, consolidation phase, and to open the door to a more significant

rally move.