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Time to go Long on Coffee

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@kingtrader72,

From a 'Trend Following' perspective my thoughts are that the opportunity has not quite presented itself to go long 'Coffee'. Maybe from a 'Value' perspective it may seem enticing. 

Looking at the 'Daily' then Coffee - London Robusta is trading below its 20, 50, 100 and 200 DMA's. 

Looking at the 'Daily' then Coffee - New York Arabica has just crept above its 20 DMA but is below its 50, 100 and 200 DMA. The moving averages curves are all sloping downwards which is a bearish signal. 

Why do you think there is an opportunity to go long here? Is it simply because you think all the downside is priced in?

Coffee prices are historical lows. The article below maybe of interest to you.

Exclusive: Brazil weighs offering coffee options to support prices - sources

https://uk.reuters.com/article/us-brazil-coffee-policy-exclusive/exclusive-brazil-weighs-offering-coffee-options-to-support-prices-sources-idUKKCN1RG2JK

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@kingtrader72,

Today's Coffee both Arabica and London are bearish. They seem like they may be travelling to a more downward destination albeit shorter term. It still does not present any reason from a 'Trend Following' perspective to go 'long'.

In fact it presents a potential short term 'short' trade opportunity if anything. 

Golden Rule (Trend Following Style) - Never trade against the trend

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@kingtrader72,

Had you gone long on 4th April 2019 then you would be losing capital. One of the reasons would be that you would be trading against a strong bearish trend.

You also need to look at the supply / demand issues for Coffee and any fundamental factors which are driving coffee prices down. One would need to appreciate the background narrative being played before placing any trading position.

I would suggest either short coffee or if you feel uncomfortable shorting an asset then wait patiently and do nothing. Wait for a clear trend reversal. 

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For those looking at how to trade coffee for the first time, the following article may be of interest. 

How to trade coffee 

https://www.ig.com/uk/trading-strategies/how-to-trade-coffee-190219

"If you’re looking to trade coffee, it’s important to understand the intricate, multi-billion-dollar economy it has created over the years. Here, we’re going to discuss coffee trading and give you more insight into the industry."

Contents:

  1. Coffee trading basics
  2. What moves the prices of coffee
  3. Four steps to start trading coffee
  4. Coffee trading strategies
  5. Coffees trading hours 

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@JamesIG,

Thanks for sharing this.

One thing the link to IG's piece on trading Coffee does not mention is that 'Speculation' also moves Coffee prices when there is anticipation in advance of a potential / possible outcome.

Hedge Funds are great at driving prices either higher or lower. 

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