Coffee Holding Near 13-Year Highs

Dec 29, 2010 (Dow Jones Commodities News via Comtex) — DOW JONES NEWSWIRES

ICE March coffee futures are little changed in quiet holiday season trading Wednesday, but the contract is holding onto impressive gains for the year as it consolidates near fresh 13-year highs. ICE March coffee recently traded down 10 points at $2.3920 a pound. For the past four sessions, ICE March coffee has been range-bound, trading within the price high and low from December 22. Additional near term sideways action is likely amid thin, illiquid holiday conditions.

Technically, the December 22 session saw a bearish outside reversal day, as the market rallied to a new recent high, but then settled lower on the day. Short-term, the market remains under that negative influence, which is driving the consolidative market tone. Nonetheless, the underlying long-term bull trend remains strong and intact. Once trading action picks up in the New Year, traders will be eyeing key near term resistance at the December 22 high at $2.4225. That is the key near term ceiling to monitor. Gains through that level would open the door for a fresh upswing in price.

Terry Gabriel, technical strategist at Ideaglobal called the move higher in the coffee market in recent months, “a parabolic move.” However, Gabriel saw no technical signals of an impending top. “It looks like this bull run is likely to continue for a couple of more months.” Nonetheless, Gabriel did call the ICE coffee market “overextended to the upside, relative to long-term moving averages.” What does that mean? “Coffee will remain vulnerable to a sudden reversal,” he warned.

Overall, however, Gabriel remained bullish looking into the New Year. Shifting out to longer-term coffee charts, he identified key upside technical objectives for the market at the $2.6300/2.7600 area. “I would be a buyer here or on weakness, with a stop under $2.2100, looking for a move to $2.6300/2.7600 over the next several months,” Gabriel said. However, on the downside, “a reversal under $2.2100 would confirm a stalled push higher,” he concluded, if that were to occur in the days or weeks ahead.