Cocoa Futures—Cocoa futures in the July contract is trading higher for the 2nd consecutive session up 32 points or 1.37% at 2362 looking to break out of a tight 6-week consolidation in my opinion. I will be recommending a bullish position if prices break the 2402 level while then placing the stop loss under the contract low which was hit on March 20th at 2201 as the risk would be around $2,000 per contract plus slippage and commission.
Cocoa prices are trading above their 20-day but still far below their 100 day moving average as prices topped out on February 7th at the 2936 level as now we have been forming a bottom over the last 6 weeks as it looks like all of the poor fundamental news has already been dictated into the price. Fundamentally speaking reduced cocoa supplies from Ghana the world’s second-biggest cocoa producer which is a positive factor for cocoa prices.
Keep a close eye on this market as we could be involved any day as the volatility on cocoa historically speaking can have tremendous price swings as the risk/ reward would be in your favor as you have to remember the longer the consolidation the more powerful the breakout.
CHART STRUCTURE: SOLID
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