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Coffee Bull-Flag Price Formation Signals Further Gain: Technical Analysis
Coffee futures may jump 13 percent to the highest price since 1997 after completing a bull-flag formation in the past month, according to Jim Stellakis, an independent analyst, and Robin Rosenberg, a futures and options strategist at PFG Best.
The attached chart shows the commodity surged to a 12-year high of $1.765 a pound in New York on June 24, traded in a range between $1.55 and $1.70 for a month, and then jumped to settle above $1.70 yesterday for the first time since February 1998. Coffee may rally to $2 in a month after yesterday’s close, said Stellakis, a former strategist at Touradji Capital Management.
“In a bull-flag pattern, the market shoots up, rests, and takes another move higher,” said Stellakis, the founder of Technical Alpha, a New York-based research firm. “In an extreme case, $2 can be the target, while a close below $1.68 could slow the advance or reverse it.”
A rise to $2 would be the highest price for a most-active contract since Aug. 11, 1997. Yesterday, coffee futures for September delivery jumped 5.65 cents, or 3.4 percent, to $1.7305 a pound on ICE Futures U.S. in New York. Traders including Ralph Hawes, the head of Sucden Financial Ltd.’s coffee desk in London, cited fund purchases and technical buying.
The commodity rose again today, gaining as much as 3.3 percent to $1.7875, the highest price since February 1998. Coffee was trading at $1.7405 at 9:55 a.m. on ICE.
“My best guess is to buy coffee on weakness” now that “this flag follows through,” said Rosenberg, PFG’s head soft- markets analyst in Chicago.
In technical analysis, investors and analysts study charts of trading patterns to forecast changes in a security, commodity, currency or index.
To contact the reporter on this story: Yi Tian in New York at ytian8@bloomberg.net.
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