Coffee Perks Up After Friday's Losses
Coffee was hit by a bearish wave on Friday, dropping the price from 122 down to the 118 level. Although unable to make a full recovery, it did manage to get back to around the 120 level with a close at 119.95. With the overall trend the last few weeks going to the downside, traders will definitely be keeping an eye on the pot over the next few weeks.
Coffee prices have dropped about 14% since reaching the 140 plateau about three weeks ago. At this point, the price is below both the 15- and 25-day moving averages, and the trend in the past few weeks has been moving down fast. Support in September was around the 120 area. Take away Friday's activity below 120, and you might have a loose interpretation of support right now. However, stochastic indicators still do not give us a reversal indication, remaining above the 20 mark.
It is often thought that whenever we are in a rough economy that people still use certain products like toothpaste, soda, and yes…Coffee. The perception of the economy is negative right now based on the Fed lowering rates .75% in its last two announcements. Using that indication, people may not want to buy the new car, but they may want to continue to enjoy a cup of Coffee – a small luxury. The perception of a slumping economy may be an indication of upcoming increased demand in Coffee.
Mike Tosaw, Director of Education
