The Hindu Business Line : Coffee may zoom higher

THE near month CSCE coffee futures price appears to be on course to hit the target zone of 150-160 cents (per pound) that was mentioned earlier (edition dated December 20). Coffee prices zoomed to a high of about 140 cents in March and have since been in a downward corrective phase.

Short-term View: Coffee prices appear to be bracing for an explosive move on the upside if the recent price patterns are any indication.

The drop in volatility is an indication that the price could see a big move shortly.

The upside breakout appears to be the preferred view from an Elliott Wave perspective.

The expected uptrend would materialise on the completion of the corrective phase that the prices are presently in.

The coffee prices appear to be tracing out a "contracting triangle" pattern, which would be labelled as "Wave 4" in Elliott Wave parlance.

The correction could result in prices testing the support zone at 114-116 cents.

After seeking support at around 114-116 cents range, coffee prices are expected to build the base for the next leg of the rally towards the target zone of 150-160 cents.

The short-term bearish trend would get extended if the price closes below 114 cents. This would push the price to 106-108 cents and the expected rally to 150-160 cents would resume subsequently.

Long-term view: Our long-term view on coffee remains unchanged. The weekly and monthly price charts continue to support the bullish trend. The long-term target for coffee is pegged at 190-200 cents per pound.

This target would be valid as long as the coffee prices hold above the 90-cent mark. A drop below 90 cents would negate our long-term bullish outlook and would warrant liquidation of long positions.

(Note: The analysis is based on historical price movements. There is a risk of loss in trading.)

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