The three day sell-off in March Cocoa has created a new main top at 2274. A trade through this price level will turn the main trend up on the daily chart. A trade through the last swing bottom at 1983 will reaffirm the down trend.
The short-term range of 1983 to 2274 suggests the market may be forming a bottom. The market made a daily closing price reversal when it created the potential final bottom. This reversal bottom was confirmed, but the market failed to follow-through to the upside. The range created a minor retracement zone at 2129 to 2094. This zone along with the uptrending Gann angle at 2103 may provide some “cluster” support.
The formation of a secondary higher bottom will be a strong sign that the market is getting ready to turn higher. Although 1983 was a better price to buy in hindsight, the odds are that it was produced by short-covering rather than new buying. Now that traders have a price to “lean” on in the form of the low at 1983, buyers may begin to step up to drive this market higher.
Another sign that a bottom may be in place will be crossing to the bullish side of the retracement zone at 2129 to 2094. This will be followed by a penetration of the downtrending Gann angle at 2164. Finally a breakout over the last swing top at 2764 will turn the main trend up on the daily chart and could trigger an acceleration to the upside into the major retracement zone at 2373 to 2466.
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