Looking at a July cocoa chart, you can see the lack of direction. After a recovery in May, most of the rally has been given back. Recent consolidation has traders confused on cocoa’s next move.
Certain areas of the world are anticipating an increase in demand as Covid-19 restrictions are lifted, but others are left with the possibility of restrictions being tightened once again. Most of this depends on the availability of vaccines in various parts of the world.
Cocoa supply doesn’t appear to be a problem. Exports are ahead of last season. Weather could become an issue— with little rain expected and high temperatures, mid-crop could be negatively affected. The currencies may also help cocoa find support at these levels.
As we reach oversold levels, we’ll see what the COT data shows us this week, as well. Look for support to hold at 2385; if this occurs, a bottom may have been reached.
July Daily Chart
If you are interested in discussing the soft commodities contact firstname.lastname@example.org.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that R.J. O’Brien believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice. There is no guarantee that the advice we give will result in profitable trades.