May coffee futures (ICE Futures US.KC) have rallied four consecutive days pushing the market above its March 20 low below $1.26 per lb. to a close on Thursday of $1.3965. Thursday’s rally was a 'big' 'trend day' rally of 3.6%. Though the chart looks rosy now, history suggests that Coffee may test the recent lows one more time before taking off much higher.
Q: How has coffee responded to 3 consecutive rallies with the final being a 'trend day' 'up big' coupled with crossing above its upper Bollinger band when the date is in the second quarter?
A: According to the nine previous occurrences of this event omitting any repeat occurrences within 10 trading days, EventEdge® indicates that coffee futures have shown a very strong bearish edge that peaks 27 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Thursday, April 17, 2008) is Tuesday, May 27, 2008.
U.S. coffee futures decline in 100% of the cases (9 of 9) by an average of 9.1% relative to the close on the event date. The overall return of the nine cases is -9.1%, which, based on the close on the event date ($1.3965), provides a target price of $1.2694.
If you would like to see more details of this historical edge, go to www.markethistory.com
To see this in EventEdge® click here.
Mickey Schoenhals is an analyst with Markethistory.com.
