It was a welcome turn of fortune for iPath Bloomberg Cocoa Subindex Total Return Exp 24 June 2038 (NYSE:NIB). In a week where global stock markets took a sharp tumble, NIB followed through on an important technical breakout. The week started ominously when NIB sold off and dove back below its 50 and 200-day moving averages (DMAs). After that setback, buyers took over: NIB ended the week strong enough to re-establish its 50/200DMA breakout, notch a 2-month high, and even stretch above its upper-Bollinger Band (BB).
The iPath® Bloomberg Cocoa SubTR ETN (NIB) closed the week with an important 2.5% gain that re-established its 50/200 DMA breakout.
My short-term trade on NIB suffered a long slog, so I used this opportunity to lock in profits. I am standing by my long-term core position.
The main positive catalyst for the week was the surprising news that Ghana might miss its output target for the current growing season. Moreover, the country fell short in its purchases from farmers between October and mid-January. This news came from Cocobod, Ghana’s cocoa regulatory institution.
“Output in the world’s second largest producer may fall short of the target of 850,000 tonnes for the season, two senior sources said, in contrast to last year when output rose to a six-year high, helped by good weather and smuggled beans from its neighbour and top grower Ivory Coast.”
With the cocoa market nearly fully priced for bad news, it is this kind of upside risk that forms the basis of my shorter term trades. If NIB dips again from here, I will be targeting $24 or so as my first new purchase.
Be careful out there!
Full disclosure: long NIB