Whatever Happened To That Coffee Rally?

In January I wrote that Coffee May Be Perking Up as there were signs of a potential bottom. It seemed then worth a small starter position. It did continue to move higher, a whole 3 cents higher, before reversing and making a new lower low.

Last week we got another signal that a turnaround may be happening. A bull flag on the daily (chart below) before Monday’s break higher. That move ended up being decaffeinated as it printed a bearish engulfing candle Tuesday, ending back below the flag.


The other indicators, Relative Strength Index (RSI) and Moving Average Convergence Divergence (MACD) also reversed and are pointing lower. That move off of the 78.6% retracement mentioned in January stalled right at the down trending 20 week Simple Moving Average (SMA) on the weekly chart and is now consolidating in a bear flag under that 78.6% level. No signs of a move higher are present now on this timeframe.

Maybe if we had just ignored the shorter time frames and looked at the monthly chart all would have been much clearer. This picture shows the drop out of the rising channel continuing with just a slight consolidation at the 61.8% retracement of the long rise from 2002. But the volume is increasing.

Yes, the angle of the RSI is becoming less steep as it approaches the technically oversold area and the MACD histogram is improving, with the signal line is still heading lower close to extreme readings.

There might yet be a reversal, but this longer view suggests it could still be months off. So grab another cup of coffee and take a peek at the chart from time to time, but keep your money in your account for now.

Disclosure: The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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