It’s time to buy coffee.
I know, I know, I can already hear the complaints… “The stock market is running all over the place and the best you can come up with is coffee?”
I said the same thing to myself 20 times before deciding to write about this.
But here’s the thing… In terms of risk/reward, the current setup in coffee is extremely low-risk and the potential reward is huge. It is the best-looking trade setup in the market this week.
The last time the chart of coffee looked the way it does today, the price popped 20% higher in two weeks. It gained 60% in seven months.
Take a look at this weekly chart of coffee…
You can see the bullish falling wedge pattern that formed in late 2015/early 2016. While the price was falling, both the MACD momentum indicator and the Relative Strength Index (RSI) were rising. This sort of “positive divergence” is an early warning sign of a potential change in trend. And it led to a significant rally in the price of coffee for most of 2016.
Coffee is set up the same way today. The chart is forming the same sort of falling wedge pattern. And there’s positive divergence on the MACD and RSI indicators.
Keep in mind, though, this is a weekly chart. The patterns tend to play out over the course of several months. So, I expect the price of coffee will be higher by summertime than where it is today.
And, based on the look of the daily chart, that rally could begin soon. Take a look…
Coffee is approaching the resistance line of the falling wedge pattern. If it can break out above the line – by closing above $1.25 per pound – then we could see much higher prices over the next few months.
Best regards and good trading,
Jeff Clark
P.S. Just yesterday in the Delta Report, I recommended a coffee trade to my readers. If coffee rallies like I expect it to, they’ll book a nice return in the next few months.
And there’s still time to get into this trade, if you act now…
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Reader Mailbag
Today, more trading stories, responses to Jeff’s Delta Direct posts, and thoughts on the new Fed chair…
Just a note to let you know that during a previous huge market crisis I panicked and as a result lost $40,000 in 1 day when I sold all my positions. However I am happy to let you know because of the way you have explained things.
Since subscribing to your service, I just held tight on everything and waited for how you reacted to the market. I am hoping that this year I will make enough in the market to perhaps be able to subscribe to your service again! Thank you for your recommendations and advice!
– Ray
I love Jeff’s commentary each day, but this morning he’s getting overexcited about “the possibility of adding some short exposure.”
– Andrew
Hi Jeff, I just wanted to let you know how much I appreciated your Direct line during the correction. I was intrigued as to the cause of the dramatic sell-off and the question as to where the money went, as it didn’t go into bonds, gold, crypto, or the dollar.
An interview on YouTube with John Williams of Shadow Stats suggested that the Fed was going to begin to unload it books and did not roll over bonds as usual. A strange gift for Janet Yellen to leave for Mr. Powell, who was sworn in as the new Fed chair right in the middle of the tempest. Everyone with an opinion to give felt the bull was over and it’s all downhill from here. Well, almost everyone.
An economist with an AI computer who does not like his secrets shared predicts choppiness for the next week, with Friday having increased volatility this week. Most importantly we have not passed a major high and new highs are expected. Bit like a weather report!
– Margaret
As always, feel free to send in your trading stories, questions, and comments right here.