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Technicals Look Weak in Coffee


Coffee had a bad week last week in terms of price action. The frost scare caused a run up in prices and short term spec interest and this was followed by a rather brutal few days of selling when it was clear that the damage was minor.


Technicals are often backward looking so their ability to predict the future is limited, but trend-following strategies are prevalent in coffee and trend-following is backward looking by definition. This strategy is valid and popular (even profitable at times) but more importantly it is employed by specs in the market so it is important to keep tabs on it.


Here is the breakdown:


Price vs Moving Averages: the SMA 20 has been violated to the downside and is in bearish mode. The longer term SMA 200 still safely intact and not under threat doe another 15c.