ICE Coffee Bulls Regain Control Of Trend -- Technical Analysis

Kira Brecht

  ICE September coffee futures are posting a second day of gains on Thursday, following Wednesday's

strong thrust higher. The market has shrugged off the July 10-17 dip below a major multi-month

support floor, which marks that sell-off as a "bear trap." The bulls have regained control of the

near term trend and the coffee market has bounced back above the old multi-month support floor.

ICE September coffee recently traded up 175 points at $1.7835 a pound.

  Looking back at market action since early March, ICE September coffee had traded in a large

multi-month sideways range bordered by strong support on the downside in the $1.6965-$1.6655 region.

On July 10, ICE coffee spiked lower breaking that support floor. The market traded as low as $1.5925

on July 15, but failed to attract follow-through selling.

  The bulls regained control with a sharp rally move on July 18 and propelled the coffee contract

back above the $1.6965-$1.6655 zone. The lack of follow-through selling and subsequent recovery

higher labels the brief dip under $1.6655 a "bear trap" and suggests that coffee is now back within

the larger multi-month neutral range.

  In the near term, the bulls have the edge. ICE September coffee is trading above its 20-day moving

average, which is a positive chart signal. A near-term target and resistance for the bulls lies at

the June 27 peak at $1.8490. That zone could represent a stiff ceiling for the bulls and minor

consolidation or even light profit-taking could emerge as coffee approaches that high.

  However, a strong and sustained rally move through $1.8490 would be a bullish signal if that were

to unfold, with the next major bullish target at $1.9975, the May 15 peak.

  Conversely, if $1.8490 holds firm, look for near-term consolidative trade to emerge between that

ceiling as resistance and the $1.6655 zone as support.