The current coffee swing, which is short, is up $2,568 per contract at today’s close. The margin requirement is $2,970 per contract.
Would like to see at least some additional weakness on tomorrow’s open to lock in another 100% gain the margin. If it doesn’t happen there is a good chance coffee will reverse to a long swing at tomorrow’s close. This is likely, at this point, on both counts so tomorrow’s a key day for coffee trades.
I last wrote about this here on September 13th:
Coffee Futures Find Their Swing Rhythm
The swing rhythm observed in that post has obviously continued (see the chart below).
(click on chart for a larger view)
After wobbling around all year with little winners and little losers and coming out flat, coffee futures in the past couple of month have found the swing rhythm that has characterized the commodity for the last few years.
I last posted on this when it finally had a single 100-plus percent move on margin. That post is here:
That was a short and it was just as the reliable back-and-forth swings in the commodity were getting going. On June 23, Coffee was flat for the year on swing trades, and since june 23, the futures are now up nearly 300% (on its margin requirement) with both bulls and bears making money on the long and short swings.
It is currently overbought (up more than 100% on margin), just as in the last post it was oversold. So the time has come for bulls to lock in the profit with a tight stop on at least part of a position, or if one chooses one can wait, looking for more upside while being alert for the reversal to the downside.
(click on the chart to see a larger view)
I have to laugh.
Yesterday it was “sell, sell, sell” on all three of the daily swing trading signals for today’s open. Took tidy profits from the open last Monday, a five-day trade. And of course, every signal reversed on today’s close to a buy for tomorrow’s open. What a bull!
So what now?
I am looking for follow-through tomorrow and Friday (maybe longer) that should take SPY and QQQ, if not into new high ground, then close to it. My play will be TQQQ and XIV but one think about LABU and SOXL which were very strong on the most recent upswing. Then, of course, there are options, futures, stocks…everything is on a buy depending on individual risk tolerances.
On another positive note, long-term breadth continues to rise and the CNN “Fear and Greed Index” resumed its advance again today (see chart below) with a higher low no less. So it would appear there is room to move up once again.
However, the sell-down in SPY, QQQ, and IWM in the last half-hour of trading today does not particularly bode well for the follow-through I’m looking for so if the day starts to slog or tumble on news or on the general American political malaise or another whispered economic jolt or on just being tired of going up, I may use the open as a stop (see other posts for an explanation of how that goes) to avoid being trapped in the current index consolidations on a down swing (even intraday).
SWING TRADING SIGNALS:
PRICE: Buy. (Day 1).
SHORT-TERM BREADTH: Buy. (Day 1).
VOLATILITY: Buy, (Day 1).
LONG-TERM BREADTH: Buy, (Day 8).
CNN MONEY’S FEAR AND GREED INDEX: (41 rising, still at a fear level).
NIFTY-50 STOCK LIST: 20 Buys; 13 Overbought, 6 Oversold, 4 new buy, 3 new sells.
(click on the chart for a larger view)
Since a big reversal to the upside on June 23rd, Coffee prices had been chugging nicely up, a rally of some 20 points from 126 to 146.
My commodity system signaled a short (it goes both ways) and the futures just made more on a single trade than it has made 19 other long and short trades this year. The short trade had a net of $5990 per contract on an initial margin of $2970, a profit of $3000 per contract, 101%. On the chart below, the closed profits YTD are in the white rectangle on the lower left and the current trade in the white rectangle on the lower right.
I suppose after looking like a new bull market was being launched in the commodity some Elliott Waver might say it still is bullish setup with this just being an obvious two-wave decline, before a big bullish three wave. but I don’t deal in wave theories. Just simple upswings and downswings with a measure to gauge overbought and oversold.
(click on the chart for a larger view)
Following the red…
(click on the chart for a larger image)