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Cocoa - New York / Cocoa London

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I thought I would mention the trend in Cocoa - New York. I wanted to wait to see if anyone else brought this to the attention of the IG community but I could not wait any longer. Trends can materialise in commodities when one least expects. 

 

The markets premium over London reached its highest since 1977. Reports indicate that it relates to system fund buying and those trading the arbitrage covering their short positions in the US market and liquidating longs in London. 

 

From a fundamental perspective the worlds surplus is disappearing. From a technical perspective the trend is strong from the start of 2018 onwards. These trends can last longer than what one thinks.

 

 

New York Cocoa_20180424_20.38.png

 

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Cocoa New York hit 2909.20. 

 

Cocoa London hit 1939.90.

 

New York Cocoa_20180502_05.25.pngLondon Cocoa_20180502_05.25.png

 

Cocoa is one of the best performing commodities of 2018. From a fundamental perspective there are issues in Ivory Coast which is one of the largest Cocoa producing areas. There is an increase in demand thus leading to a supply and demand scenario. 

 

It is reported that heavy rainfall could damage the April to September crop in Ivory Coast. From my experience this kind of bullish price action in commodities normally stems from either some harsh / adverse weather conditions or the media and expert commodity analyst making bold and bullish predictions / assumptions. I think Cocoa is getting both. 

 

These trends can last longer than one anticipates. However, always have one eye on a possible shorting opportunity should it arise. One must be ready as in Cocoa the price tends to drop over a short period of time where as the price tends to increase over a longer period of time. Therefore one can profit from a shorting opportunity in a short timescale.

 

However, in my opinion right now at the time of writing it is not the time to short as one must not go against the trend. 

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I have been trading commoditis with IG since 1992. The last few years I have concentrated more on stocks but the last 6 months I have started comming back to commodities.

 

Many new traders are put off by futures and the expiry dates.

 

There are many US and UK listed ETFs (ETNs) such as NIB which trackes Cocoa. They are fair from perfect but offer a way to get exposure.

 

As you have stated Cocoa is up 50% so far this year.  My experience in commodities its 2 or 3 markets that become the big winners in one year - then the next year its something else.

 

Sugar is on my radar as a possible long comming back from the dead...

 

SD

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,

 

I used to actively trade commodities back in 2006 - 2013 period using Exchange Traded Notes (ETN's) by ETF Securities. They offered leverage both to the long and short side with some products having x2, x3 and some specific with I think x5 leverage.

 

As trading commodities can be high risk I used these products to help manage my risk. I could not lose more than my capital as there was no margin call to worry about. Also I could using hedging strategies such as going long corn and short wheat or long oil and short natural gas, etc.

 

I agree my experience tells me a similar thing that there are always one or two commodities a year that give excellent returns on the long side. However, there are several that give even better returns on the short side. I don't know if you short commodities but have a look at those commodities that have gone down over the past 12 months and you will see from the charts some excellent opportunities to profit from prices going down.

 

Have a look at platinum on the daily chart and you will see the opportunity to short from the start of the year. The same with Zinc, Lead and Soybean Oil.

 

Sugar in my opinion has been an excellent shorting opportunity. One should not wait to go long on Sugar as an effective trade would have been to short it over the past 12 months. This is maximising your capital and profits allocated to trading commodities. When the trend reverses in Sugar then you can always go long Sugar then. This way you are utilising your capital to the maximum efficiency. 

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Good point forgot to say about shorting and Oil was one of my most profitable shorts ever using an inversex3 ETF.

 

 

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There seems to be the possibility of Cocoa - New York and Cocoa - London potentially breaking out.

2050078389_LondonCocoa_20191112_20_36.thumb.png.a1979b5886877c7dfe78059792aad75a.png

It is about identifying these strong trending assets at the earliest opportunity. Now all one can do is monitor the price action and it may not lead to anything as it may be a false potential but nevertheless it is worth keeping an eye on this one even if nothing materialises. 

1793010848_NewYorkCocoa_20191112_20_37.thumb.png.bf588a32a352280272c92cd26c6a6be8.png

With Christmas around the corner one can only assume that there is an increase in demand for Cocoa. 

The article below will be of interest to some of you. Ivory Coast and Ghana are two of the main players in the Cocoa industry. 

https://ghananewsagency.org/economics/ghana-and-african-development-bank-sign-600-million-cocoa-loan-159565

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Both Cocoa - New York and Cocoa - London are up today. The 'daily' chart is looking bullish and it seems Cocoa has some momentum for now. 

The price on both is trading above its 20, 50, 100 and 200 DMA's on the 'daily'. 

Also volume is showing an increase in line with the recent price gain. 

 1916650344_NewYorkCocoa_20191113_20_48.thumb.png.ff91ae98180cc05afe2ad922a05ed544.png

It seems the 'Awesome Oscillator' is about to turn in London Cocoa's favour. 

1970124513_LondonCocoa_20191113_20_49.thumb.png.483d5f3aeafdf91687d0ddaaa3b72f4a.png

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Cocoa London has reacted to the opposite of how I expected. It has been downtrending for the past month as the chart below shows and has been a great 'shorting' opportunity. 

1792198833_LondonCocoa_20191214_12_42.thumb.png.40c9d19e9e64c107be5d0a424d491c42.png

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The short trade continues...

1124921870_LondonCocoa_20191219_19_00.thumb.png.088e7da240ba481306a90c2e02e90062.png

It would not surprise me for London Cocoa to hit the 1672 level.

New York Cocoa is looking like it really is about to drop strong.

184834883_NewYorkCocoa_20191219_19_01.thumb.png.5d43226fbe940d7cf574810a350242f0.png

As a trader it is great if you can make money as assets decline in price. It means that it does not matter if prices are trending upwards or downwards as you can make money regardless as long as they are not trending sideways.

 

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Guest GuestTrader

Am I able to trade cocoa on my mt4 account with IG? I can find cocoa when I use my CFD account but not my IG mt4 account

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20 hours ago, Guest GuestTrader said:

Am I able to trade cocoa on my mt4 account with IG? I can find cocoa when I use my CFD account but not my IG mt4 account

Hi, no cocoa is not on mt4.

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Both Cocoa London and New York are just about attempting to make 'lower highs' and 'higher highs' on the daily but the moves are very sharp both ways.

It is a very difficult and choppy trade and more suited to 'Swing Traders' as to set effective stop losses would be required.

414205531_LondonCocoa_20191230_10_39.png.3fff90f503d0ebcd5dd854f506417cec.png

Of course there are no guarantees that this series of patterns and price activity will continue in the future but at present it seems we are seeing the price swing upwards in this current move. 

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If you look at my previous post (above) and see that I was expecting the price to swing upwards, that is exactly what has happened as you can see from the currently 'daily' chart below.

869320971_NewYorkCocoa_20200118_12_32.thumb.png.584acf72a07a04adf65abf7351882b1c.png

If this trend / pattern continues then the price will swing back downwards as it continues to try and make 'Higher Highs' and 'Lower Highs' until anything changes in terms of demand / supply fundamentals. 

I think Cocoa is one of the better Commodities to trade for 'Swing Traders' as you can see from the charts above in this post and previous posts. 

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Hi TrendFollower,

 

I've been following the LDN cocoa since mid Dec, at the last turn. Looks like the beginning of turn started this afternoon, i'm going to wait for the open tomorrow and see what happens!

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@Bopperz,

Apologies, I did not see your reply.

f you use @ and then start typing TrendFollower then it will come up @TrendFollower and you can tag me so that I am aware that you have posted something to me. 

I hope that makes sense!

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@Bopperz,

It seems the turn as started as I eluded to in my previous posts. I do hope any 'Swing Traders' on IG are taking advantage of this price behaviour?

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I am 'anticipating' and 'expecting' a further decline in Cocoa so that it aligns nicely on a trend line with previous 'Higher Lows' when looking at the 'daily' timeframe.

447897090_LondonCocoa_20200201_12_38.thumb.png.915da4093534f5106325fbe0e9835051.png

The only thing that would can my view on this if there was a change in narrative or backdrop to Cocoa in terms of fundamentals (supply and demand) which led to a change in price behaviour of the historical patterns that you can see on chart above. 

I think Cocoa is a brilliant asset to trade for 'Swing Traders'. Especially those who trade with a slightly longer timeframe. 

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Hi,

I would like to look at some fundamentals. Has anyone any idea where this "GEPEX" data is published? Their website is rubbish! http://gepex-ci.com/

Reuters News

BIDJAN, Jan 15 (Reuters) - Ivory Coast cocoa grinders processed 143,000 tonnes of beans by the end of December, up from 137,000 tonnes the previous season, data from exporters’ association GEPEX showed on Wednesday.

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18 hours ago, TrendFollower said:

@dmedin,

The question now is whether the price will continue its downward path or resume upwards?

 

There's the argument that if buyers have gone all in then there are fewer market participants available to sustain the high ... and we saw what happened with coffee.  TThe key MAs are aligned for an uptrend though and it's made a higher high (although the RSI hasn't, which is a bearish divergence).

I think this is a key support/resistance level.  So you'd have a long with a stop just beneath it if you think it's going to be sustained.

767769891_LondonCocoa_20200220_12_16.thumb.png.da9a08367387deb639efdee4b85a9645.png

Edited by dmedin

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On 19/02/2020 at 16:01, dmedin said:

😱

Selection_001.thumb.jpg.2b60c0da8750b938bb6ed7a549c550ba.jpg

Is that the Commitment of Traders data you are plotting along the bottom? What software are you using for that?

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1 hour ago, Bopperz said:

Is that the Commitment of Traders data you are plotting along the bottom? What software are you using for that?

hi, it's not an indicator it's a screenshot from cotbase.com

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Cocoa looks like it might make a poo poo :( I will have to exit my trade if it carries on like this!

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@dmedin,

Making a directional call on a trade is an important aspect many do not consider. This is where one can look at the fundamentals in terms of supply / demand / weather conditions / economic or political unrest in a particular region, etc. 

With Cocoa understanding the longer term direction can be important if your shorter term direction is the same. Stop loss management is down to each individual. I am a high risk trader so I will have wider stop losses than many simply because I do not want to get stopped out due to volatility. One can look at historical volatility on an asset they are looking to trade to understand what could happen if they set a stop loss which is too tight. Of course day trading is different but I am referring to medium to longer term trading. 

If you look at my post from 1 February then you will see what my thinking was. I could be wrong which is fine. I do not have a problem with being wrong. 

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