Coffee futures looked like they’d turned a corner – until the caffeine of the latest short covering rally wore off today:
Apparently those 5 Hour Energy commercials were right. (via BarChart.com)
Coffee’s been in a bear market for nearly two years now, after topping the $3 mark in early 2011. The contrarian in me thought that a bottom may have been put in just above $1.40. Time will tell, but today was not encouraging for those, like me, anticipating a return of cheesy “Coffee Perks Up To New Highs” headlines.
The selloff was likely sparked by selling by coffee producers looking to take advantage of the recent price gains, said James Cordier, president of Liberty Trading Group.
“I think the size of what was for sale surprised a lot of speculators,” he said. “Today certainly speaks volumes that coffee is not a bullish market.”
Coffee is an extremely volatile market. The best practices here are to keep your leverage light and stops far enough back so that you don’t get shaken out of a good trade. A break below support at $1.40 would indicate that coffee is still in a bearish trend.