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Cocoa Technical Analysis - Cocoa Trading: 2017-06-22
Improved Cote d'Ivoire crop forecast bearish for cocoa prices
Cote d'Ivoire cocoa harvest is expected to rebound without El Nino re-emergence. Will cocoa prices continue falling?
The Australia Bureau of Meteorology joined the US National Weather Service predicting little chance of El Nino developing during the second half of 2017. Earlier this month the US lowered the likelihood of El Nino emerging between October and December to 36% from 46% previously predicted. With no drought developing as El Nino re-emergence fails to materialize, Cote d’Ivoire crop will rebound after weaker 2015/2016 harvests negatively affected by 2016 El Nino. Cote d’Ivoire accounts for 41% of global cocoa production. Higher global supply is bearish for cocoa price.
On the daily timeframe the COCOA: D1 has been falling after hitting year to day high in late March and has fallen below the 50-day moving average MA(50).
- The Parabolic indicator gives a sell signal.
- The Donchian channel is tilting lower, signaling start of downtrend.
- The MACD indicator gives a bearish signal.
- The Stochastic oscillator is in the oversold zone, which is a bullish signal.
We expect the bearish momentum will continue after the price breaches below the lower Donchian bound at 1901.00. This level can be used as an entry point for a pending order to sell. The stop loss can be placed above the the fractal high at 2107.00. After placing the pending order, the stop loss is to be moved to the next fractal high, following Parabolic signals. By doing so, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (2107.00) without reaching the order (1901.00), we recommend canceling the position: the market sustains internal changes which were not taken into account.
Technical Analysis Summary
| Position | Sell |
| Sell stop | Below 1901.00 |
| Stop loss | Above 2107.00 |
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