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Time for a cup of Arabica Coffee!

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Coffee - New York (Arabica) is displaying very positive price action. 

 

I think some research on the fundamental drivers of the price action will need to be done. When it comes to trading commodities if you can get positive price action either on the long or short side and there are clear fundamental reasons then it tends to make the moves much more longer and stronger. This is excellent for making more profits from the trade. 

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Coffee - New York (Arabica) is beginning to look very interesting and one may want to consider entering a long trade.

It is trading above its 20, 50 and 100 day moving averages. I have included the current chart below from IG.

1039912988_CoffeeArabica_20181015_20_28.thumb.png.e7b8d1fa571af1f5759b8151c81a277b.png

It seems that prices may have bottomed. There is a clear uptrend in play. For me some of the best trades are when one spots the breakout early and enters the trade before the media start reporting and jumping on the bandwagon. 

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I am new to commodities but was wondering what external factors drive the market most as surely weather has a large impact on the likes of foodstuffs does this make them hard to predict?  

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@Pottsypotts,

There are many external factors that can affect the price of commodities. I trade commodities based on trends looking closely at price action and how the price is behaving.

However, I do like to try and understand the fundamentals as to why the price is behaving the way it is. 

Commodities are what I would deem capital-intensive so basically they are influenced by natural factors like weather conditions, crop diseases, etc. On top of this there are factors like the economic and political environment. Now these factors can affect the cost of producing the commodity and the demand for it.

Some simple and basic research on the Internet can usually assist in finding the reason why the commodity price is increasing or decreasing the way it is. Time dedication will usually (not always) give you the answers from online media publications. Reuters, Financial Times and the like have a commodity section which can be a useful source of information. Websites like Agrimony is also good.

https://www.agrimoney.com

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Thank you for the informative reply, i actually work for the worlds biggest Agrochemical company and read company bulletins re: weather affecting sales etc

 

 

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@Pottsypotts, that is excellent.

@cryptotrader, you may be interested in today's price action where Arabica Coffee is up 450 points and 3.8% at the time of writing. It was slightly higher earlier. 

This is an extremely strong trend we are witnessing. It may be short term but it does not matter. It is a trading opportunity to make some profits on the long trade. Leverage will increase the profitability of the trade but one must use caution and sound risk management in case there is a vicious trend reversal which is quick and deadly. 

 

275137431_CoffeeArabica_20181017_17_16.thumb.png.8a6894d9e3add62af2e8fca56b68b615.png

I have never flown to space but I imagine a rocket taking off would look like the chart above! ?

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Oh I forgot to mention an IG Analyst will now publish a story on the price action of Coffee - New York (Arabica). ?

If one wanted to trade this from a hedging perspective then could consider going long Coffee - New York (Arabica) and then go short Coffee - London (Robusta) which is also trending upwards but at a slower pace than Arabica. 

The above is just a potential trade idea and is by no means the correct trade and nor is there any guarantee of any success in such a trade. I am just putting this out there as IG Community is there to encourage the 'sharing of trading ideas'. 

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Sometimes just noticing a pattern however simple can really help to hone into the habit of following the price action and observing how it behaves. 

For Coffee (Arabica) I have attached the chart and as you can when you zoom in to October we are really beginning to see a pattern emerge. 

One of the major premises of technical analysis is that history repeats itself. For me there is no guarantee of this. Spotting such patterns can increase the probability of something happening but nothing more. In my experience the bigger the move upwards the greater the chance of a trend reversal. Without such a big move there is no trend to reverse!

1515637108_CoffeeArabica_20181020_09.11-2.thumb.png.ae018362721214e78e73f7c54860ea7e.png

An interesting test here will be to see what happens next?

One must test their assumptions and not be worried about being wrong. Being wrong is fine as long as one understands why they were wrong and the reasons behind it. Also important lessons and experience can be gained from being wrong when making such assumptions.

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