Cocoa Recovery Not Over Yet

The Commodity Trader’s view Cocoa has already enjoyed a good recovery from last October’s low. Bulls then paused for thought as a consolidation/pullback took hold. A key support area has recently been neared, prompting a bounce that could well be the start of the next leg up.

• MONTHLY CHART – CONTINUATION: The 76.4% level of the 2004-2008 rise, near 1800, currently underpins the market. It is close to old highs from 2003/2005 –reaction here has been very positive.
• DAILY CHART – MAR-09: The bull move from the Oct low found strong resistance from the 61.8% recovery level. The market has eased back towards key support in the 2300 area (50% pullback level/28-Nov high/falling return line), and this has prompted a smart rebound. We had been assuming that any s/term weakness would be only temporary/corrective. Buyers on dips (as suggested in last Monday’s Commodity Trading Guide) will have stops below 2300 initially, targeting towards 2700/18 for partial profits, then seeking a break higher to the next target around the 76.4% 2911 level. The bull scenario would be in serious jeopardy should price fall below both the key 2300 area and the lower 2200 61.8% pullback level.

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