The Decaf Market for Coffee

If I did not know better I would assume that someone has secretly been replacing regular caffeinated coffee beans with decaf over the last year. I suspect it has been Howard Schultz since he declared early last year that he was not hedging his costs. Just look at the chart below. That trendline support has been pulling it lower since mid March 2011. And what is with the hard dive Tuesday? But as it gets to the trendline this time it is looking rather ugly. The Relative Strength Index (RSI) is falling sharply and the Moving Average Convergence Divergence (MACD) indicator

has just crossed negative. Both support more downside. The last 4 times it has approached the trend the MACD has been improving. Danger Will Robinson. Stepping back to the weekly chart shows how the $2.00 level is significant and below that could trigger a cascade lower with $1.80 next and solid support near $1.30. Whoa! Go Howard! At this point if you are not short it seems prudent to wait and see if the trendline and $2.00 mark hold. If they don’t it appears there is a lot of

room to the downside. And for those of you that do not play the commodities market and only experience coffee price from Starbucks, have no fear as there is an ETF for that. The iPath Dow Jones-AIG Coffee Total Return Sub-Index ETF, $JO, tracks the price of Coffee very well. So there is room for you to get involved as well. Check out the chart below. The brown background is the price of coffee. Pretty tight fit huh?

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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.

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