COFFEE
Here is an interesting illustration on a commodity that we consume almost every day. I have always been a coffee fan. Of course born and raised in Turkey, Turkish coffee has been a part of our daily life. I start and finish my day with coffee and consume 4-5 cups per day. When I saw this great illustration I thought of the importance of coffee during my work day and my trading of this highly volatile commodity, so I revisited my charts. If you are a technical analyst that lives and dies by charts you see almost everything in charts, patterns and prices. So here is a brief history of coffee on how it changed America. I also share a long and medium term analysis of coffee price that you might find interesting.
Long term coffee chart goes back to 1979 and it clearly shows the importance of 280 level over the past three decades. In 2011 Coffee price tested the long-term horizontal resistance at 280 levels and pulled back. Same level was tested in 1986, 1994 and in 1997. Every time price tested the horizontal long-term resistance, it pulled back sharply except this time (at least for now).
To analyze the supply/demand dynamics in the intermediate term I’m presenting a shorter term view. On the second chart (weekly scale) 2002-2012 can be seen as a nice uptrend developing in a parallel trend channel. In 2011, price reversed from the upper boundary of the trend channel and the long-term horizontal resistance at 280. This was a strong resistance. Coffee price is now below its 200 day moving average and the RSI is below 50 levels (bearish signals). Downtrend on the RSI and on the price chart shows that Coffee is headed lower in the short/intermediate term. I believe 200 day moving average will be an important threshold to call for further weakness or a possible reversal to the upside. If price breaches above 240 level with a confirmation from the RSI (breaching 50 level) then we will expect a re-test of the long-term horizontal resistance at 280 once again. Otherwise, we will expect the price to pullback to the lower boundary of the trend channel at 150 levels.
