COFFEE

If a market is below its 200 day moving average, it is likely to experience downward pressure on each high volatility period. When analyzing a chart I try to make sure below conditions are satisfied.

1) Direction on the long-term chart should be clear. If a market is above its 200 day moving average I should trade the bullish breakouts and expect the short-term chart patterns to break upwards. If a market is below its 200 day moving average I should trade the bearish breakdowns and expect short-term chart patterns to resolve on the downside.

2) I always follow volatility and look for chart patterns. Low volatility begets high volatility and vice versa. I combine volatility breakouts with the long-term technical outlook.

On the 23rd of January I’ve posted the long-term chart for COFFEE price. (http://techcharts.wordpress.com/2012/01/23/coffee/)

Long term price chart signaled weakness for COFFEE with stop-loss at 240 levels. Since the last update price moved lower and technical outlook deteriorated. Given that the price has been trading below the long-term moving average the latest volatility breakout on the daily chart signaled additional weakness in the short-term. COFFEE price is in a clear downward trend and with the intermediate/long-term stop-loss standing at 233 levels. Unless price moves above this level we should expect lower prices for COFFEE.