Blue Line Breakfast Report - Sugar Cocoa Coffee OJ - January 23

Actionable Trading Ideas that help you stay ahead of the markets

Cocoa

The 2nd best commodity out of the basket of 48 we monitor at Blue Line Futures and up over 10%% on the year. Cocoa closed sharply lower on the session after posting the highest print since April 2018 and with four straight weeks worth of gains this market feels like it needs to catch its breath. Remember pullbacks down to support are healthy in bull markets while total collapses are not. The selling we saw today might see some follow through liquidation tomorrow as demand concerns for many commodities have come front and center because of the Coronavirus continuing to spread.

Trading Perspective

If you were able to get long on January 10th with the V shaped breakout at 2588 you might want to ratchet up your stops to protect your position. Remember as a rule of thumb try and protect 70% of your open trade equity at all times. While sell triggers come in at 2581, we closed out many of our longs over the past 3 sessions. If you did not get involved in this move from the start and want to counter trend trade, I believe you are a bit early, however consider just buying outright put options as a trading vehicle. If the market collapses volatility will explode and if you are wrong it should be a slower loss of equity.

Sugar

The 3rd best performing commodity of the year out of the basket of 48 but it is also another market I expect to have a correction sometime soon. I like this chart now a bit more than cocoa because sugar already went through a consolidation phase last week at the start of this week. Continued threats to global supply should help sugar maintain its positive momentum but keep a close eye on crude oil and corn. If those two markets fall we could see more coiling action ahead of us.

Trading Perspective

The buy side breakout signal was on January 6th at 13.73 for March sugar and your first area of support is 14.40 while sell stop triggers are down at 13.50. With ADX strengthening, stochastics in overbought territory and DMI+- widening out, it might be time to tighten up the stops and protect the equity in the trade while a breakout over 14.80 would refuel the fire behind this market. The buys over the 14.60 breakout I referenced yesterday were mostly liquidated due to the fact crude started to break and we were unable to hold above 14.70 so its best in my opinion to wait for another new breakout.

Orange Juice

Trading Perspective

Down 2.76% on the year and 11th worst performing commodity, trend traders were triggered into shorts back on January 13, at 95.60 for the March contract. Like typical OJ fashion hes trying to figure out if he should head north or south and heading south might exhaust itself at 90. This was longer term support and at this point I would consider longer dated call options looking for a possible short covering rally. Resistance still is up at 97.25 where a rally back up to 104.80 is possible.

Coffee

Traders perspective

The worst performing commodity of the year out of the basket of 48, down over 14.42% on the year. Coffee has neither triggered a long or short and is still neutral however I am leaning towards the bear camp with a break below critical support at 109.75. At that point we could expect another move lower down to 105.00 and a near perfect head and shoulders pattern would be painted on the charts.

Good luck and good trading,

Phillip Streible

Chief Market Strategist

312-858-7303

Phil@Bluelinefutures.com

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Futures trading involves substantial risk of loss and may not be suitable for all investors. Trading advice is based on information taken from trade and statistical services and other sources Blue Line Futures; LLC believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades. All trading decisions will be made by the account holder. Past performance is not necessarily indicative of future results