Java Blues or Cause for Caffeine High

If you look at a daily chart of Coffee ($KC_F) the long downtrend is the first thing you see. If you are an investor then maybe you have the Java Blues. Look at the chart below.

Nothing in this chart bullish. The Relative Strength Index (RSI) has failed to break back above even the mid line and every time the Moving Average Convergence Divergence (MACD) indicator goes positive it flattens quickly. This looks like a set up for a great short back to the trend line support. Now before you start down the path of “I don’t trade futures though” look at the correlation between the futures and the Coffee ETF, $JO below. The brown area is the $JO price. Fits about as tight as


the glove in the OJ trial. Now stay focused. But zoom out a bit to the weekly chart and things start to look a little bit different. Perhaps an extended bear flag. Or maybe continued downside. The RSI is certainly trending lower but on decreasing volume with a MACD that is improving. But those shorter Simple

Moving Averages (SMA) that are turning lower. Let’s zoom out further to the monthly chart. This is a totally different story. A long 10 year uptrend with the price just pulling back to the mid line of that channel. There is plenty of room lower before this will turn bearish on the monthly scale. But it is

Also on the support of the 20 month SMA which has been a helping hand higher. This suggest that maybe the year long downtrend may be over. It will take a couple of months before we know for sure. And will leave plenty of opportunity to short it to the bottom of the channel if it is not done. But until it is more clear put on a pot of coffee and sit back and watch. Here is a little music while you wait.

If you like what you see above sign up for deeper analysis and trading strategy by using the Get Premium button above. As always you can see details of individual charts and more on my StockTwits page.

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

blog comments powered by Disqus
Dragonfly Caps Blog