Coffee futures are trending steadily lower on the shorter time frames, creating a fine short opportunity not just for futures traders, but also by way of a primary coffee ETF that has tracked the trend almost perfectly.
If you look at a daily chart of coffee futures, the long downtrend is the first thing you see. If you are an investor, then maybe you have the java blues.
Look at the chart below.
Nothing in this chart is bullish. The Relative Strength Index (RSI) has failed to break back above even the mid-line and every time the Moving Average Convergence Divergence (MACD) indicator goes positive, it flattens quickly.
See related: Demystifying the MACD Indicator
This looks like a set-up for a great short back to the trend line support. Now, before you start down the path of “I don’t trade futures, though,” look at the correlation between the futures and the iPath DJ-UBS Coffee Subindex Total Return ETN (JO) below. The brown area is the JO price.
Fits about as tight as the glove in the OJ Simpson trial!