Technical Analysis #C-COCOA : 2018-10-22

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IFCMarkets Technical Analysis
IFCMarkets Technical Analysis

The global cocoa processing increased. Will cocoa prices rise?

According to the Cocoa Association of Asia, the cocoa processing in Asia rose 3,7% in the third quarter from a year earlier to 196,4 thousand tonnes. The increase was 5.9% compared with the previous quarter. According to data from the National Confectioners Association the cocoa processing in North America rose 2,5% in the third quarter from a year earlier to 128,5 thousand tonnes. Earlier, the European Cocoa Association reported about increase in cocoa processing in European countries. Usually growth of global processing indicates increase in demand.

Cocoa

On the daily timeframe, Cocoa: D1 left the downtrend and is trying to adjust upwards from a 8-month low. The price increase may occur in case of the global cocoa processing will increase in future.

  • The Parabolic indicator gives a bullish signal
  • The Bollinger bands have widened, which means low volatility. They are tilted upwards.
  • The RSI indicator is above 50. It has formed a positive divergence.
  • The MACD indicator gives a bullish signal.

The bullish momentum may develop in case COCOA exceeds the last fractal high at 2235. This level may serve as an entry point. The initial stop loss may be placed below the last fractal low, the the 8-month low and the Parabolic signal at 1995. After opening the pending order, we shall move the stop to the next fractal low following the Bollinger and Parabolic signals. Thus, we are changing the potential profit/loss to the breakeven point. More risk-averse traders may switch to the 4-hour chart after the trade and place there a stop loss moving it in the direction of the trade. If the price meets the stop level at 1995 without reaching the order at 2235 we recommend cancelling the position: the market sustains internal changes that were not taken into account.

Summary of technical analysis

Position Buy
Buy stop above 2235
Stop loss below 1995

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