Daily December Cocoa Pattern, Price & Time Analysis by James A. Hyerczyk
December Cocoa is showing signs of life. After reaching a bottom at 2523 on October 18, the market has embarked on a five day rally, setting up a possible change in trend on a breakout over the last swing top at 2703.
Following a move through 2703 traders have to be careful about buying strength since downtrending Gann angle resistance comes in at 2720 today. This angle is likely to provide a short-term technical bounce following the first test. Since the angle is dropping 10 points per day, based on current upside momentum, the market may just pass over this angle over the next few days.
Following a change in trend to up, December Cocoa should have room to rally since the next upside target is the retracement zone of the 3150 to 3523 main range at 2837 to 2910.
All of the upside action taking place is technically based since the fundamentals remain bearish. Earlier in the month cocoa futures fell on speculation that supplies from theIvory Coast and Ghana would exceed demand for the second straight year.
Although there is plenty of supply available on expectations of large crops in Ghana and the Ivory Coast, short-traders may be forced to cover if the swing top at 2703 is taken out. Short-term oversold conditions may also be contributing to the bottoming action.
