Cocoa Futures (NBT.CC) opened Wednesday's session higher than Tuesday's close, but finished the day with a 1.8% decline. CC closed the session at $2,511 per metric ton. CC also experienced a bearish MAD crossover on the day, where the daily Moving Average Convergence Divergence indicator line (the difference between two exponential moving averages) crosses below the slower Signal line (an exponential average of the MACD line). Will the fact that Wednesday was the first trading day of October affect CC?
Q: How has ICE Futures U.S. cocoa performed in the past when, during October, it opens up but experiences a bearish MACD crossover?
A: According to the 10 previous occurrences of this event, EventEdge indicates that NBT.CC has shown a somewhat bearish edge that peaks 16 trading days after the event. Thus, the projected date for the peak of the bearish edge relative to the current event date (Wednesday, Oct. 1, 2008) is Thursday, Oct. 23, 2008.
Cocoa declines in 90% of the cases (9 of 10) by an average of 5.6% relative to the close on the event date. The average of the one rally is 1.0%. The overall return of the 10 cases is -5.0%, which, based on the close on the event date ($2511), provides a target price of $2385.
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Ronish Patel is an analyst with MarketHistory.com.
