Blue Line Breakfast Report - Sugar Cocoa Coffee OJ - Weekend Report
Cocoa - YTD up 8.07%
Traders should have exited longs and look to attack the downside as uncertainty surrounding the impact of the Cornonavirus weigh in on global demand. Remember that cocoa has always been a market sensitive to changes in economic activity and with open interest back near contract highs, stochastics coming out of overbought territory, we could be setting up for a correction back down to support at 2700. If this level is breached , watch for a quick move down to the 50% retracement of the December low to January high. Consider put options with 2-6 weeks until expiration for this market or if you use futures your easy tap out point is a close over contract highs.
R2 - 2850
R1 - 2800
S1 - 2700
S2 - 2625
Downside target = 2700
Reversal point = 2850
Sugar - YTD up 7.08%
Another market I believe to be impacted by the Coronavirus and after the reversal high on Jan 23rd and follow through selling on the 24th we could be setting up for a correction back down to support around 13.90. Open interest has exploded since the start of the year on prospects that the global supply picture has a growing deficit of 6 million tonnes and expanding. However with the recent collapse in crude oil and gasoline, ethanol production could be curbed therefore reducing the supply threat.
R2 - 14.90
R1 - 14.69
S1 - 14.26
S2 - 13.92
Downside target = 13.92
Reversal point = 14.90
Orange Juice - YTD down 4.26%
OJ continues to fail to make headlines as prices have been in a well contained area of consolidation for the past couple weeks. From a technical perspective it appears this market could make a move in either direction. If we see a break over 97 we could see a short covering rally back up to 104 while a break below recent support of 94.25 could result in a washout back to 90. Personally my bias is neutral on this market for the time being and there are better opportunities at the moment.
Coffee - YTD down 14.76%
The V shaped chart pattern in coffee probably has a bit more to run and I do not think we have seen the full washout yet. With the market unable to hold any gains for more than a day the longs are most likely using the hope and pray strategy that a short covering rally comes soon. One of the stocks that has sparked my interest is Luckin coffee which is the equivalent to a Chinese Starbucks and with the spread of the Coronavirus and Luckins sharp selloff, I have to assume that coffee demand is going to slump in the near future weighing in on futures prices.
Good luck and good trading,
Chief Market Strategist
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*percentage figures are taken at time of writing
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