Coffee Futures traded at ICE Futures U.S. closed at $1.368 on Tuesday, rallying 1.6%. This comes one day after the May contract (KCK) expired, settling at $1.351. The July contract (KCN) has been, historically, bearish coming out of May expiration.
Since coffee futures began trading in 1973, they have declined 91% of the time (31 of 34) 25 trading days after the May contract expires. Tuesday's rally even indicates more bearishness.
Q: How has coffee futures performed in the past after rallying one day after the May contract expires?
A: According to the 21 previous occurrences of this event, EventEdge indicates that coffee has shown a strong bearish edge that peaks 25 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Tuesday, May 20, 2008) is Wednesday, June 25, 2008.
Coffee declines in 95% of the cases (20 of 21) by an average of 9.5% relative to the close on the event date. The average of the one rally is 13.4%. The overall return of the 21 cases is -8.4%, which, based on the close on the event date ($1.368), provides a target price of $1.2531.
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Ronish Patel is an analyst with MarketHistory.com.
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