Oct 9, 2011

Coffee Update-(All mkts in stand-by mode.Decreased volatility (VIX) confirms this!)

Correct assessements of fundamental data changes will make the diference in the achievement of success in positions on medium term .

For coffee ,watch the rainfall patterns ,it must continue within average seasonality,from now on, first two weeks of october are a turning point to coffee belt spring rainfall patterns , at least historical average october rainfall are needed this year to support and grow the good recent flowerings which points to a record "on year" coffee crop in 2012-2013.
Before the spring flowerings "beans promises" does not become "coffee tree assured buds", more or less, at the end of this year , coffee prices should respect technical supports untill there!

Daily: 2.20 level should hold this week.Last week rally has happened on increasing open interest (+- 3.000 lots) and low volume , which shows that new sellers were not there anymore , friday´s plunge has happened on low volume and appears to be: "weak hands" pre-weekend liquidation.

Weekly: After testing the 50% Fibo retracement of the 1.30/3.10 rally at 2.20 ,the neckline resistance around 2.36 was challenged and not broken, creating an weekly indecision candlestick on the charts.
Open interest shows that close to 14.000 lots were added as new shorts during the 2.90/2.20 plunge , last week mkt data has shown that new shorts selling potential seens to be exausted.

Botton Line: Weekly charts are still bearish ,but ma´s channel support was touched and many technical divergences are showing up on daily charts. With the help of seasonality:(Brazil crop selling end rally)+ temporary weather uncertainties,few agressive new buyers could be able to oblige indulgent greed shorts to liquidate their short positions.Despite last friday wild plunge , new agressive longs could easily return to the mkt this week , if they succeed in pushing prices above 2.36 , the next upside objective will be the test of the open upside gap at 2.5100/2.5135.
Risk-reward odds favors bullish biased short strangles.(i.e. sell close to the money nearby puts and sell further out of the money nearby calls) (ex: sell kcz11 2.00 puts + kcz11 2.50 calls for a total premium of 500 points).
Good trades.

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