Blue Line Breakfast Report - Sugar Cocoa Coffee OJ - February 1

“Actionable Trading Ideas that help you stay ahead of the markets”

General Market Commentary

It appears that the market is finally starting to realize the potential ramifications that the Coronavirus would have on the global economy. We have seen multiple businesses close up shop in China bringing their economy to a screeching halt. Commodities like copper have seen 11 straight days of declines as well at the cattle market. The stock market was slammed on Friday with declines in the Dow Jones over 500+ points. Multiple airlines have halted flights to and from China and Starbucks has closed 2000 locations. This is why beyond metals and energies the soft market is intriguing.

Cocoa - YTD up 8.86%

Another impressive showing out of the cocoa market this week given the extensive selloff in the U.S. equity markets. With demand destruction so far avoided, this market is tip toeing higher on reduced production estimates and hot dry weather in the key growing regions in Ghana and the Ivory Coast. Tracking weather developments in that region is the equivalent of watching paint dry. There is a slight chance of rain on Sunday night coming into Monday but other than that it is 90+ degrees during the day and 65 at night.

From a technical perspective the trend traders continue to maintain long positions from January 10th at 2588 and with support at 2735. Sell triggers are down at 2679. A move down through 2679 puts them on the sidelines. Some of the key technical indicators I closely follow are more in the middle of the range so you might want to wait for the breakout to occur in order to add to your positions.

R2 - 2859

R1 - 2826

S1 - 2741

S2 - 2673

Upside target = 2859

Reversal point = 2673

Sugar - YTD up 8.42%

This market is still standing on its own two feet while its big brother crude oil is getting knocked down left and right. Even with energy demand slumping and the Brazilian Real as low as I’ve ever seen it, the market continues to find support from the declining crop size. There is considerable talk that India and Thailand's production levels are even lower than already stated.

The trend traders are still long with entries back on January 6th at 13.73 and with the market settling at 14.61 the first level of support comes in at 14.36. The sell triggers are down at 13.84 and is a place to get out not a place to reverse.

R2 - 15.49 - High Nov 20th 2017

R1 - 14.90

S1 - 14.36

S2 - 14.05

Target - 15.49

Reversal point = 14.05

Brazilian Real Daily Chart

Orange Juice - YTD down 4.06%

Technically this market has no idea what it is going to do. A savvy trader would have been selling short dated option strangles but that just simply not in the average traders playbook or in their risk parameters. With trend traders short the first two contract months and long the back two, it looks like they don’t know whether to make heads or tails. One would need to wait for a breakout on either side in order to initiate a position.

Coffee - YTD down 21.24%

I almost spit my coffee out when I saw that this market somehow managed to rally on Friday. With 2000 Starbucks closed in China one would have to imagine that coffee demand is going to be significantly off. This up day was most likely large shorts covering their positions in order to support other losing positions like long equities.

Trend traders have been short coffee since January 24th at 110.15 and with the market settling at 102.65 they are comfortably ahead on the week. First level of resistance is up 107.27 and buy triggers are at 116.10. That is the level they would blow out of positions, not the level they would initiate longs.

R2 - 113.70

R1 - 109.09 - 200 DMA

S1 - 100.50

S2 - 96 - Key low from last October

Good luck and good trading,

Phillip Streible

Chief Market Strategist


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