Commodities

Technical Analysis – Cocoa futures rebound to challenge the upper bound of the descending channel

Posted on June 14, 2018 at 3:50 pm GMT

Christina Parthenidou, XM Investment Research Desk

Cocoa futures for July delivery have finally reversed to the upside last Friday after printing lower highs and lower lows in the preceding six weeks to reach a three-month low of 2,245 on June 7. The downward pattern started at the end of April, however, may not change unless the market manages to crawl substantially above the descending channel.

Momentum indicators in the four-hour chart though are currently supporting that positive momentum is likely to strengthen in the short-term. Specifically, the RSI is picking up speed above 50 and the MACD continues to distance itself above its red signal line.

Should the price decisively close above the roof of the descending channel, seen at 2,470, bulls could extend the uptrend towards 2,556, with the region around that level acting as resistance back in March and April. Further advances above this level, could then target the area around 2,639 which had successfully halted upside movements during the aforementioned months as well. Such move could also post a clear step above the Ichimoku cloud, asserting that the trend is likely to stay tilted to the upside.

On the other hand, a decline could meet the 20-period moving average at 2,335 which the market was unable to break through from mid-May to early June. Slightly lower, the price could retest the middle line of the channel approximately at 2,295, before more bearish movement shifts the focus to the 2,245 trough.

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