Cocoa Futures
Cocoa futures in the May contract is breaking a 3-day winning streak currently trading lower by 5 points at 2441 as the volatility certainly has increased over the last several sessions as prices have skyrocketed in recent days. I have been recommending a bullish position originally in the March contract as then we rolled into the May contract around the 1990 level & if you took the trade the stop loss has now been raised to 2141 as the chart structure is terrible at the present time however it will start to improve on a daily basis, therefore, lowering the monetary risk so continue to place the proper stop loss as who knows how high prices can trade.
There are major concerns that the hot & dry weather conditions in West Africa could impact cocoa yields, but only time will tell to see if that actually happens as I think today is just a pause due to overbought conditions, but I still see higher prices ahead.
The next major level of resistance is all the way up at the 2600/2700 level as cocoa can become extremely volatile during certain times of the year as that is what we are finally starting to experience at the current time as it could get even more violent as I still don’t think the top has been formed, however, if you missed this trade do not chase as you have missed the boat as the risk/reward are not in your favor at this time so move on and look at other markets that are beginning to trend as there are several.
TREND: —HIGHER
CHART STRUCTURE: POOR
VOLATILITY—HIGH
