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Cocoa Market Analysis

July cocoa was able to post a new 1-month high early in today’s session but is having trouble sustaining upward momentum this morning. A rebound in the Dollar as well as sluggish global equities are clearly pressuring the cocoa market, which may be vulnerable to some profit-taking after a $105 rally during the past four sessions. A large daily increase in ICE cocoa exchange stocks on Friday may lead to carryover pressure this morning, particularly if outside markets maintain their negative tone. However, the stronger growth levels reflected with the Asian first quarter cocoa grinding data helped to offset lukewarm results from Europe and North American and put the market’s focus back on the near-term supply situation in West Africa. Indications of stronger commercial demand out of Ghana and the Ivory Coast are likely to keep the cocoa market well supported near these recent highs. The most recent Commitment of Traders report indicated that non-Commercial traders had reduced their net-short cocoa position as of last Tuesday, although remaining large enough to leave the market vulnerable to a short-covering bounce later on today. Non-Commercial traders were net short 14,572 contracts, a decrease of 2,708 contracts for the week and the short-covering buying trend is seen as a positive force.
While a negative tone from outside markets has taken July cocoa away from new high ground this morning, a supportive supply/demand outlook should help to keep prices fairly close to the recent highs.

Technical Analysis

COCOA (JUL): The cross over and close above the 60-day moving average is an indication the longer-term trend has turned positive. Daily stochastics have risen into overbought territory which will tend to support reversal action if it occurs. The market’s close above the 9-day moving average suggests the short-term trend remains positive. Market positioning is positive with the close over the 1st swing resistance. The next upside objective is 2365. The next area of resistance is around 2344 and 2365, while 1st support hits today at 2274 and below there at 2225.

 

StockMarketNews Research Team

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