Coffee Update May 2015 (W)
Created on Wednesday, 06 May 2015 00:13
Written by Austin Galt
Coffee has just broken support so it is back to the drawing board. Let’s use th e weekly chart to try and identify the next likely level for a buy setup to occur.
COFFEE WEEKLY CHART
The PSAR indicator shows price has just busted its support denoted by the dots. While price has not yet hit new lows, this suggests that they are just around the corner.
So where is the next likely level for price to bottom out?
The Bollinger Bands show price was rejected at the middle band and is most likely destined for the lower band again. I favour price finding support this time at the lower band which currently stands just above US$120.
I have added Fibonacci retracement levels of the move up from November 2013 low to October 2014 high and the 76.4% level looks like it’s about to give way after giving a good sight. The next level is the 88.6% level at US$115.14. I often find price bottoming out just before hitting that level so we are certainly close to the low in my opinion.
I have drawn a Fibonacci Fan and it looks like price will find support around the 88.6% angle which just happens to be right in the middle between the 76.4% and 88.6% levels.
A new low is likely to set up a triple bullish divergence on both the RSI and Stochastic indicators. That often leads to a significant rally.
I am still viewing the coming low as point 6 in a 7 point broadening top formation.
So, while it has been frustrating waiting for this low to form I suspect that wait is nearly over.