Coffee futures (KC) traded on ICE Futures US experienced a 'very big' 'bearish reversal' on Tuesday, settling the day at 160.65¢ per lb. As recently as Friday, coffee was trading at a 52-week high; has a short-term top been reached? Let us turn to history.
Q: How has the coffee futures market performed in the past when it experiences a 'very big' 'bearish reversal' while commercial hedgers are net short of contracts?
A: According to the 12 previous occurrences of this event, omitting repeat occurrences within 10 trading days, U.S. coffee futures has shown a bearish edge that peaks 5 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Tuesday, March 4, 2008) is Tuesday, March 11, 2008.
U.S. (Arabica) coffee futures decline in 92% of the cases (11 of 12) by an average of 5.3% relative to the close on the event date. The average of the one rally is 7.5%. The overall return of the 12 cases is -4.2%, which, based on the close on the event date ($1.6065), provides a target price of $1.5390.
If you would like to see more details of this historical edge, go to www.markethistory.com
To view this event in EventEdge, click here.
Ryan Soudan is an analyst with MarketHistory.com.
