Technical Analyst Says Cocoa to Fall 12% in Two Months

Posted Sep 2nd 2010 3:30PM by Connie Madon
Filed under: International Markets, Forecasts, Rumors, Industry, Market Matters, Commodities

Technical analyst, Jim Stallakis,writing for Businessweek. com says cocoa could fall 12% in the next two months.

Technical analysts use charts and various indicators to arrive at their predictions. One key tool that most traders use are support and resistance levels. Support levels are just that. They support the price at a given level. Resistance levels are upside points were trading occurred, but then backed off. Breaking support levels usually means further downside movement. Conversely, breaking through resistance levels signals a rally.

Stallakis says the first level of support is at 2600. If that is breached he is looking for 2400. He is looking for these numbers in the next two months. December cocoa futures are trading near the 2691 level, just 90 points away from Stallakis' first target.

The main reason given for the decline is that the the Ivory Coast and Ghana, the world's largest producers, will have bigger harvests.

Cocoa is an extremely difficult commodity to trade. A few months ago we had cocoa trading at near record levels on rumors that cocoa was scarce. Now we have just the opposite. The one item to keep in mind is that the numbers coming out of Ivory Coast and Ghana are unreliable. Unless you know firsthand what the crop is like, it's best to stay away from this trade.

Tags: inthenews, technical analyst see cocoa falling 12 in 2 months

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Reader Comments (Page 1 of 1)

9-02-2010 @ 9:34PM

william lindblad said...

??

Beats me also, but as this is not a staple crop, fluctuations would be the norm. If this were one hundred years ago when this commodity was a big mover and in widespread use this would be of concern, today it is not. Diets, tastes and people have been changing, and changing radically in the last 30 years. Check the condiment isle, if one really wants green ketchup or hot sauce it can be found. That is why the drought on the Steppes will likely bring higher prices as there are simply more people interested in wheat and it's by products than ever before.
If one went looking for a cocoa pot I am willing to be that it would be a hard find - on the other hand a loaf of bread would not.
The commodity market has never been for the faint of heart.