Entering Coffee Futures on a Multiyear Low and Repeating 1-2-3 Bottom Formation

 

Coffee is trending up, as can be seen in the daily March 2014 Coffee Futures Chart below.  A 1-2-3 bottom formed in early November, with new #2 and #3 points forming late November and early this month (December).

There’s lots of upside potential with the 50% retracement level near 148 (as can be seen on the Weekly Chart below).  Prices already broke above the original #2 point formed on 11/11 at 109.85, and had we been watching this market back then we would have went long when prices broke above 109.85.   Now there’s a new opportunity to enter the Coffee Futures market when prices break above the latest #2 point at 112.9 formed on 12/4.

We are going to put a buy order in to purchase 1 March 2014 Coffee Futures contract at 112.95 and long with the target of 148.  Current opening margin for Coffee Futures contracts is $1705 with a maintenance margin of $1550.  Keep an eye on Coffee in the next few days.

Alternatively, we could purchase an out-of-the-money Call Option with a strike price of 115.0 (1150) for $937.50 (250 x $3.75/tick).  That gives us ~2 months before it expires.

Daily Coffee - March 2014

 

Weekly Coffee Monthly Coffee

 

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