Coffee C futures (symbol: KC) have rallied from the $1.0095/lb support level on 07Nov13 to $2.1320/lb as of this writing on 22Apr14. The price action is impulsive and occurs on the back of strong volume and higher volatility. Although overbought in the short term, Coffee appears to have confirmed a trend change with potential for substantially higher prices.
Recall our 12Feb14 article ‘Coffee Rally to Test $1.50 Level’ (http://murphycofutures.com/coffee-rally-to-test-1-50-level/) ”….. trend reversal can only be confirmed with trade above a) the resistance at the $1.50 level and b) the downtrend line originating from the May11 peak which currently lies above the $1.60 level”. Both conditions have been met.
While the next major resistance resides at the $2.92 level, Coffee is overbought in the short term. Expect some backtesting to the recently created support at the $1.66 level, or potentially to the $1.49 level which would result in a test of the major downtrend line originating from the May11 high. However, be alert as the impulsiveness demonstrated within the last several weeks can be extremely powerful.
Murphy & Co’s Coffee model is currently long. To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/.