Technical Analysis #C-COCOA : 2018-05-31

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IFCMarkets Technical Analysis
IFCMarkets Technical Analysis

High rainfalls are expected to produce abundant mid-crop in Ivory Coast, the world’s top cocoa producer. Will cocoa prices continue the decline?

Good cocoa harvest is expected in Ivory Coast, the world’s top cocoa producer. The country is in the midst of the rainy season, and while the rainfall has been below average in central and southern regions, the west and southeast have received above average rainfalls. Even so farmers in southern region expect the mid-crop to be more abundant than last year. Higher expected crop forecast is bearish for cocoa.

Cocoa price

On the daily timeframe the COCOA: D1 has been trading with negative bias after hitting twenty-month high in the end of April. It has fallen below the 50-day moving average MA(50) which has leveled off.

  • The Donchian channel is neutral: it is flat.
  • The Parabolic indicator has formed a sell signal.
  • The MACD indicator is below the signal line and the gap is widening, which is bearish.
  • The stochastic oscillator is rising from the oversold zone, this is a bullish signal.

We believe the bearish momentum will continue after the price closes below the lower boundary of Donchian channel at 2525. This level can be used as an entry point for placing a pending order to sell. The stop loss can be placed above last fractal high at 2854. After placing the order, the stop loss is to be moved every day to the next fractal high, following Parabolic signals. Thus, we are changing the probable profit/loss ratio to the breakeven point. If the price meets the stop loss level (2854) without reaching the order (2525, we recommend cancelling the order: the market has undergone internal changes which were not taken into account.

Technical Analysis Summary

PositionSell
Sell stopBelow 2525
Stop lossAbove 2854

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