The Hindu Business Line : Outlook positive for coffee futures

Comments: The outlook for the near month CSCE coffee futures appears positive. A move to the previous swing high of 79.2 cents (per pound) appears likely.

However, the prices are likely to rule weak in the near term. Coffee prices are in a consolidation phase, which does not appear complete as yet.

Short-term view: The coffee futures price is likely to drop to earlier swing low at 69 cents. After testing this low, prices are likely to bounce back to the high of 79.2 cents.

The recent patterns indicate that prices are tracing out either a contracting triangle or a regular flat pattern in Elliott Wave parlance. In either case, a test of the low at 69 cents appears likely.

Long-term view: The long-term outlook, based on monthly coffee charts, appears bullish. Prices broke out of a 14-month consolidation and touched a high of 79.2 cents in January.

As it is typical after any breakout from a consolidation, prices are re-testing the high of the consolidation range at 69-70 cents. After a successful test of this level, coffee price is expected to resume the uptrend. On the upside, a test of 150-160 cents level is not ruled out.

Though it may not happen overnight, a gradual upward move to this range appears likely. Only a break below the very strong support level at 56-58 range would call for a re-look at the long term positive outlook for coffee.

(Note: The above analysis is based entirely on technical analysis of the historical price movement. There is a risk of loss in trading.)

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