Coffee Futures (KC_F) formed a lower high in October 2018 and have been declining since then. In the last 6 months, KC_F lost approximately 27.8% dropping from a high of 125.51 to it’s current levels. In this blog, we look at the cycle from 11.8.2016 peak and explain whether prices could recover soon or any bounces should rather act as selling opportunities. Let’s take a look at the chart below which shows the sequence and the cycle from 11.8.2016 peak.
Coffee Futures (KC_F) Cycle from 11.8.2016 peak
In the below chart, we can see Coffee Futures (KC_F) is showing 5 swings bearish sequence down from 11.8.2016 peak. First 3 swings ended at 9.18.2018 which was followed by a quick bounce to 125.51 that ended on 10.19.2018. Coffee Futures then started turning lower again and eventually managed to break below 9.18.2018 low. Break below 9.18.2018 low has created an incomplete bearish 5 swing sequence which puts sellers in control. This doesn’t mean decline would be in a straight line and certainly, bounces will take places but any bounces are expected to fail in a sequence of 3, 7 or 11 swings for continuation lower towards 75.33 - 63.42 area initially. This is the typical area for 5th swing to end and it’s from here that KC_F could see the biggest bounce since the cycle started on 10.19.2018 peak. However, this bounce would also be expected to fail below 10.19.2018 (125.51) peak for another swing lower to complete 7 swings down from 11.8.2016 peak. It could reach as low as 44.17 (100% Fibonacci Extension) to complete 7 swings sequence down from 11.8.2016 peak. We don’t like buying the pair and expect sellers to appear in the bounces in 3, 7 or 11 swings as far as pivot at 10.19.2019 (125.51) high remains intact.
