Orange Juice: Is the 2012 Free Fall Finally Over?

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Orange Juice: Is the 2012 Free Fall Finally Over?
As early as February, this Elliott wave pattern enabled our Futures Junctures Service to anticipate the freefall in orange juice prices which had followed

By Nico Isaac
Thu, 02 Aug 2012 09:15:00 ET

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At the start of 2012, commodity bulls were drinking in more than their daily recommended allowance of orange juice futures. Before January was over, OJ prices had rocketed to a 5-year high, then 34-year high, then all-time record high in its sharpest rally ever, and the bulls were happy.

The rally in OJ was so strong that on January 20, the ICE Futures US Exchange increased the maximum daily limit for OJ futures from 10-cents to 20-cents.

And, according to the mainstream experts, OJ prices were smack dab in the middle of a "Perfect Storm" of bullish "fundamentals," including:

Whispers of a ban on OJ imports from the world's largest producer Brazil due to the presence of a non-FDA-approved fungicide.
A 28% decline in inventories, according to the US Department of Agriculture
A significant 40% decrease in domestic production between 1996 and 2010
And the first-ever detection of a destructive citrus disease in Texas groves.

All mainstream signs pointed UP, as this late January news item makes plain: "We have the potential to take this market to $2.60 without too much difficulty. We are in unchartered waters." (Reuters)

Yet, according to EWI's February 2012 Monthly Futures Junctures, ALL objective signs pointed DOWN in OJ. There, EWI's chief commodity analyst and Futures Junctures Service editor Jeffrey Kennedy identified a clear and complete Elliott wave impulse pattern from OJ's 2009 low.

For newbies, an impulse is a 5-wave, non-overlapping price move that adheres to these 3 rules:

Wave 2 may never retrace more than 100% of wave 1
Wave 3 may never be the shortest impulse wave of waves 1, 3, and 5
Wave 4 cannot end in the price territory of wave 1.

So, while orange juice bulls were celebrating, in the February 2012 Monthly Futures Junctures "Featured Market" segment, we presented the following chart of OJ alongside this key insight:

"Orange juice's advance from 64.60 to 226.95 has all the subdivisions needed to identify this rally as a completed impulse wave. Moreover, the final wave of this rally took the shape of an Ending Diagonal.... a terminating wave... We can look for OJ prices to trade below the September low of 148.50 by mid-March."

The next chart moves forward in time and shows how OJ prices ignored the widely expected opportunity to be bought on bullish rumors, and instead, turned down in a precipitous, 60% drop to a 3-year low in late May.

As for whether OJ's bearish trend has ended -- well, Jeffrey Kennedy has both sides of the market covered:

The July 31 Daily Futures Junctures shows you the near-term wave pattern underway in orange juice, while:

The June 2012 Monthly Futures Junctures "Featured Market" segment includes detailed analysis, charts, and video forecast for OJ's long-term trend.

Get the full story today via a risk-free Futures Junctures Service subscription.

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Video 3: FORECASTING - Get Jeffrey's big-picture outlook for commodities and learn the tools needed to forecast successfully.

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Tags: commodities, diagonal, Elliott wave, fundamental analysis, Jeffrey Kennedy, Orange Juice

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