Buy Some Coffee Today

• Posted by Greg Harmon
• on May 18th, 2016

I like my coffee black and strong. I want to be able to taste all it has to offer. No added flavors or steamed milk. Just bold rich coffee flavor. My choice is and has been Sumatra from Starbucks for years. For me there is no other alternative available to make at home everyday.

Remarkably I have noticed that the price of a pound of that Sumatra has been pretty steady over the last 6 years. But coffee prices in general have been anything but that. The chart below shows the monthly spot price of Coffee in the futures market. You can see it had a strong run higher from 2002 to its peak in 2011. A steady tend down retracing 78.6% of that move followed for the next 3 years. It was quickly bought up there and held at a 50% retracement of that move with a short inter-month spike to 61.8%. The since that 2014 high it has been falling again.

The start of the year saw the price touch a 88.6% retracement of the shorter spike and then support. Which brings us to May 2016. The price now looks to be breaking the range to the upside. And it has support from other indicators to do so. The RSI at the top of the chart is turning back up. It too made a higher low, like the price has. And the MACD is about to cross up. This is a bullish buy signal and notice it too is happening at a higher low.

How high will it go? The nested Fibonacci retracement levels are getting a bit thick so I have left the current range off. But a 50% retracement, like the last spike would look for a move to 1.69. That is 27% higher than it is right now. If it goes to 61.8% then the price would be 1.83 and 78.6%, like the first retracement, it would move to 2.02. Now, how do you like your coffee?

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