Today, Cocoa Futures prices reached a new recent low of 2943 (at the time of this post). We are short Cocoa Futures with a Put option (at a 2850 strike price) we purchased back on March 25 (see our post: Shorting July Cocoa on 1-2-3 Top Formation).
When we shorted cocoa futures with our put option, we didn’t wait to see if the 1-2-3 top formation was going to ‘firm up’. Looking at the Daily Cocoa chart below, you can see that today’s low so far of 2943 is pretty close to the #2 point of 2922 in the VERY WIDE 1-2-3 top formation that eventually formed over the past several weeks. Wide 1-2-3 top and bottom formations usually indicate a strong and prolonged move in the market. We expect if/when prices break below the #2 point of 2922 our 2850 strike price put option should be in the money soon after. Stay tuned!