Coffee May Be Perking Up


The coffee futures market has been in decline since May 2011, losing half its value from the $3.08 per pound high last reached in 2010. Greg Harmon of Dragonfly Capital makes a technical case for why it may have finally bottomed.

From a purely technical perspective there are signs that the bottom in coffee (JO) may be in. The daily chart below is where the signs first show up. The three rounded bottoms, in the price, Relative Strength Index (RSI) and Moving Average Convergence Divergence indicator (MACD) all are giving a buy signal. It is a cautious buy as the price has been above the 20 and 50 day Simple Moving Averages (SMA) in the past (look to July and October) before starting the next leg down.

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A move up over 1.59 would give it some strength and then over the 200-day SMA would likely get many bullish as it has not maintained above that indicator since September 2011. A starter position seems right. Moving out to the weekly chart shows that the latest bounce is happening at the 78.6% retracement of the major run higher from 2008 through 2011.