Orange Juice Cup & Handle Signal Price Gains: Technical Analysis

Orange-juice futures that rallied to a seven-month high yesterday may jump 16 percent further by mid-February, according to technical analysis by Infinity Trading Corp.

Prices will top $1.60 a pound on ICE Futures U.S. in New York, the highest since April 5, after completing the “cup-and-handle” formation, said Fain Shaffer, the president of the Medford, Oregon-based Infinity. The futures contract for delivery in March closed yesterday at $1.375.

The so-called cup formation was created as March futures slumped from a high of $1.3095 on Sept. 14, bottoming at $1.0675 on Oct. 31, before resuming gains in a U-shaped turn that peaked Nov. 26 at $1.2865. When the price approaches its previous high, investors who bought at or near that level tend to sell. That occurred in the two weeks ended Dec. 10 that resulted in a so-called handle.

“The cup-and-handle formation is a bullish indicator,” Shaffer said yesterday in a Dec. 12 e-mail. Orange juice may reach $1.6195 in the next 30 to 45 days, assuming a 50 percent retracement from the low of 97.10 cents on May 18, Shaffer said.

Orange-juice futures through yesterday were down 18 percent from a year earlier, after reaching $2.2695 on Jan. 23, the highest on record for a most active contract.

In technical analysis, investors and analysts study charts of trading patterns and prices to predict changes in a security, commodity, currency or index.