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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.


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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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.


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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. 



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!


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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I am sure some of you have identified the breakout in Coffee - New York (Arabica). 

The current price action has led to it trading above its 20, 50, 100 and 200 DMA. This is bullish and it is a strong breakout. 


If one looks at the Parabolic SAR then one will see a bullish trend being indicated. 


Now look at the momentum chart and one will begin to see a potential strong and bullish trend emerge. This can reverse pretty quickly or experience a sharp correction so one must be careful.


So what I am going to do is connect the 'Technicals' with 'Fundamentals' so we can better understand the reason for this price move. Some of you will be aware but if not then Brazil's real has been rallying recently and it actually hit a six week high against the US Dollar recently. Now this meant that producers were not selling as a result. Last month in May saw one if its best percentage returns in nearly two years. Yes that is right nearly two years. I have stated many times that it does not matter what the asset is. It is the price action and the trend we are interested in. The stronger and bigger the trend the better. End of. If one can understand the reason for the move then even better but it is not the end of the world if one cannot. 

Also from a fundamental perspective and looking at 'Suppy & Demand' fundamentals then heavy rain in most of the coffee areas in Brazil could cause issues in terms of harvest. The weather predictions also suggest a prolonged dry period may occur. Now at the moment the frost season has started in Brazil and we all know that weather can play havoc on Commodity prices at the best of times so traders must be aware of this.

Now if you look at the chart 'daily' then this is still in a long term downtrend so one must be very careful and understand their exit plan if they are long.


Hopefully by looking at both the 'Fundamentals and Technicals' it can assist in any decision making process. Some traders may look at this and see potential shorting opportunity. Others may just ride this current short term trend upwards until it changes or reverses. Each trader will have a different strategy to play this price action. From a 'Trend Following' perspective I would suggest holding on to any long positions until there is a clear indication of a trend change. 

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I see you have started to look at Coffee. Excellent. If you look at both Arabica and London (Robusta) then one could argue that we are witnessing oversold conditions especially if you look at longer term timeframes like the 'Monthly' and potentially the 'Weekly'. 

For me it is about identifying potential breakouts. We may see that in the days and weeks to come but right now at this moment in time both on the 'daily' are trading below 20, 50, 100 and 200 DMA's so it is still bearish for me. It is one I am monitoring closely. 

Commodities can offer some excellent trading opportunities and produce some of the strongest trends. I do not use or apply EWT but if you can use it to effectively increase your chances of success which leads to a greater chance of profiting then all the best. 👍

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When looking at the fundamentals for Coffee they seem bleak. Brazil crops have added to the oversupply.

Understanding the 'Demand and Supply' in Commodities is very useful and when the fundamentals are linked with the technicals then it can allow you to trade Commodities more effectively. 

Apparently small time growers in Central America are fleeing the industry. It is when times are so bad that there can be the beginning of a strong trend. Now this may or may not happen with Coffee but it is worth monitoring the price action. 

Now imagine if there is a recession around the top consuming coffee nations? This would reduce the demand for coffee or the amount of coffee being consumed. Add the oversupply issues and there could be further downside risk or it could have already been priced in. This is what a trader needs to work out. 

Now when all the bad news is priced in one can begin to look at any breakout and strong trending action upwards. It is all about following the price action, being patient and at times doing nothing but monitoring. 

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