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Commodity Focus: Raise Your Cup to Coffee
EWI's Daily Futures Junctures' coffee chart shows a clear Elliott wave triangle pattern underway

By Nico Isaac
Wed, 29 Feb 2012 19:00:00 ET

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Over the past week, coffee prices have been doing the dreaded dance of the typewriter ribbon: i.e., go sideways, sideways, sideways -- and STOP. Ding! Go back to the beginning -- and, repeat.

During these times, it's common to see the mainstream financial experts adopt one of two approaches: "Fence-sitting," or waiting for a "fundamental" factor on which to pin the prices' eventual breakout from their holding pattern. Either way, the light for taking market action stays at red; yellow, at best -- but never green.

So you can imagine my excitement when today, EWI's chief commodity analyst and Futures Junctures Service editor Jeffrey Kennedy explained why coffee's sideways price action is actually a GREEN light to an opportunity in this commodity market.

Nico Isaac: Jeffrey, I'll get right to it. To the naked eye, the past week in coffee prices has looked like this -- a cross between a Rorschach test and a leaky pen.

But in your February 23 Daily Futures Junctures, you were actually able to identify a clear Elliott wave pattern -- a triangle -- in coffee prices. According to your analysis, coffee was adhering to one of two scenarios:

Unfolding in a triangle wave 4, as illustrated in the first chart below, or
Unfolding in a triangle wave b, as illustrated in the second, alternate Elliott wave chart below

Nico: What are the common tip-offs of price action that indicate a triangle is underway?

Jeffrey: Slow, choppy, sideways movement. AND, prices are contained within parallel trendlines.

Nico: So, what exactly is a triangle?

Jeffrey: It's a corrective pattern that contains five overlapping waves labeled A through E. Triangles are formed by connecting the termination points of waves A and C, and B and D.

Nico: Can triangles occur at any time in a trend?

Jeffrey: No, they can only occur in the fourth wave, B wave, or x wave. This makes them especially compelling as they occur in the position prior to the final move of a trend.

Nico: And which of the two triangle scenarios above -- wave 4 or wave B -- has coffee's price action confirmed this week?

Jeffrey: Coffee prices recently experienced the familiar "pop-and-drop," thus confirming that my alternate wave B triangle count was correct. The rest of this week and the next week should prove exciting for coffee.

Nico: Thank you so much for your time, Jeffrey.

And, speaking of time, don't squander another second to get complete access to Jeffrey's full Daily Futures Junctures analysis on coffee via a risk-free subscription.

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Tags: coffee futures, Daily Futures Junctures, Elliott wave, Elliott Wave trading, Jeffrey Kennedy

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