Technical Analysis #C-COCOA : 2019-09-18

[IFC Markets]

Falling Indonesia output bullish for cocoa price
Cocoa production is falling in Indonesia and Malaysia. Will the cocoa price continue rising?

Cocoa production is decreasing in Indonesia and Malaysia. Indonesia is the third-largest cocoa exporter in the world after Ghana and Ivory Coast. Indonesia produced around 260,000 metric tons (MT) of beans in 2017, down 31 percent from the previous year according to the Indonesia Cocoa Industry Association (AIKI) estimates. Indonesia now imports cocoa with 240,000 MT imported in 2018. Cocoa beans yield low income which motivates farmers to switch to profitable crops like palm oil. Falling cocoa crop in the world’s No. 2 exporter of the commodity is bullish for cocoa price.

On the daily timeframe the COCOA: D1 has been rising and has breached above the 200-day moving average MA(200).

• The Parabolic indicator has formed a buy signal.
• The Donchian channel indicates uptrend: it is tilted up.
• The MACD indicator gives a bullish signal: it is above the signal line and the gap is widening.
  
• The RSI oscillator is above 50 level but has not reached the overbought zone.

We expect the bullish momentum will resume after the price breaches above the upper Donchian bound at 2384. A price above that level can be used as an entry point for a pending order to buy. The stop loss can be placed below the lower Donchian bound at 2184. After placing the pending order, the stop loss is to be moved to the next fractal low, following Parabolic signals. By doing so, we are changing the expected profit/loss ratio to the breakeven point. If the price meets the stop loss level (2184) without reaching the order, we recommend canceling the order: the market sustains internal changes which were not taken into account.

Technical Analysis Summary


Order Buy
Buy stop Above 2384
Stop loss Below 2184