Coffee Futures (ICE Futures US.KC) enjoyed a 'big rally’* on Wednesday, tracing a bullish reversal on the day. Despite the gain, with a price of 136.50 coffee remains in a downtrend measured by its 50-day simple average. It seems that historically, this big ‘bullish reversal' ** day has been nothing more than a head fake.
Q: How has U.S. coffee performed in the past when, while trading below its 50-day average in the second quarter, it experiences a 'big' rally while tracing a 'bullish reversal' pattern on the day?
* A big rally is a percentage gain of more than one standard deviation above the average 1-day move measured over the previous 30-trading days.
**A bullish reversal is a higher high, lower low, and higher close.
A: According to the 16 previous occurrences of this event, omitting repeat occurrences within 10 trading days, U.S. coffee futures has shown a very strong bearish edge that peaks 46 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Wednesday, April 9, 2008) is Friday, June 13, 2008.
ICE Futures US .KC declines in 100% of the cases (16 of 16) by an average of -12.3% relative to the close on the event date. The overall decline of the 16 cases is 12.3%, which, based on the close on the event date ($1.365), provides a target price of $1.1971.
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.
