Coffee Udate: Eight Year High Signals Further Gains!

By: Ray Tato | Mon, Feb 11, 2008
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For the last six years, the price of coffee has been in a Primary Advance that has mapped out a large Multi-year Head & Shoulders Bottoming pattern that has an active, upside price objective of 237.75 as shown on the Continuous Monthly Chart NMC1. When looking at this chart, notice that the first-leg of this advance started at the Secular low of 41.50 in Dec 2001, and rose in price thru a series of higher & higher highs and lows to a 73 month high of 139.50 in March of 2005. Also notice, that after this near historic and overbought mark, the second-leg of the primary trend started and a series of events unfolded that produced many bullish signals. First of all, the fourth (4) point of the Multi-year H&S Reversal was set. Then, a Symmetrical Triangle formed, which led to the fifth (5) and final point for the H&S Bottom at the same time that a successful test of the up-sloping primary trendline was met in May of 2007. And,...all this sprung up within the confines of a Right Shoulder that completed its formation of the large evolving reversal pattern.

Moving further, another example of how resolute the ongoing price extension has been is through the Stochastics indicator as shown on chart NMC1. Looking closer, notice that this alternating seesaw of flux shows whether prices are closing in the upper or lower regions of the selected time frame for the chosen Oscillator. In this case, the stochastics is in an elevated region over 90 and near an extreme overbought area. But since the pendulum can still swing to 100, there is still room for appreciation into the upper territory, which would lend well to the third phase or leg that started with the close above the neckline at 147.20 in all three time frames.

Turning to the intermediate term trend in Chart NMC2, notice the Symmetrical triangle is active and is getting closer to its price objective of 160.00.

Question: Will the price be met? Most likely. Why? Well, first of all, the monthly chart is signaling a very bullish scenario with a robust price target of 237.75. Plus, with the close above the neckline on the Weekly and Daily charts, this means all three trends are going in the same direction and more upside is expected, especially since the daily chart has a Pennant formation that broke out thru the upper boundary line and is now targeting 156.20 as shown on Chart # 3.

Looking closer at Chart # 3, notice that the price of coffee has eclipsed the former Benchmark price high of 144.10, and as I said in my last article, 'it will be interesting to see if the gap present on both the weekly and daily Charts are filled to the downside before any more upside takes place'. Well, as you can see on both the Daily and Weekly charts, the gap was filled and a new up-trend began that has taken the price of coffee to a new 8 year Historic high! What happens in the day's and week's ahead concerning the price objectives we covered here in this report, will be determined by how well the important support levels hold up. Also, as long as volume and open interest keep increasing along with price as shown in Chart # 3, a healthy technical environment will be present.

And, if the momentum indicator shown here continues to stay in an upward and rising mode, any small pullbacks could result in another buying opportunity. We will see!

 


 

Author: Ray Tato

Ray Tato

Disclaimer: Ray Tato or the Apprentice Technicians Outlook will take no responsibility for the accuracy of these source charts for price and time comparisons. They are the representations of an outside agency. I did not create the original content, supply the data needed or generate the original source charts for public viewing. I only try to convey what I see as a technical analyst. Nowhere in this abstract is there any indication to trade or invest. This piece is for educational as well as theoretical practice only. This is an exercise, and can in no way be viewed as a reason to put ones capital at risk. I do not advise you to trade based on this report.

Bio: Ray is an independent analyst and investor who began his education in the financial markets in 1985 by working on the floor of the Chicago Board of Trade. In 1999 Ray began his Technical Analysis studies at the Chicago Mercantile Exchange where he became a classical bar chartist. Along with charting, Ray like to study cycles and wave theory and mostly follows the DJIA. In his spare time, Ray plays blues on the harmonica. Ray lives in Chicago.

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