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Commodities , Trading

Coffee & the Golden Ticket of Opportunity

by Nico Isaac
Updated: April 24, 2023

This is Chart of the Day, and I'm Nico Isaac.

"Coffee & the Golden Ticket of Opportunity"

My dad always says you can't put a price on a strong cup of morning mud. And, seeing as his preferred "blend" is a just-add-water pack of Nescafe, mud is right on the nose.

But, this April, a popular Café in Portland Oregon put a very steep price on a special blend of ultra-premium, natural processed coffee; $150 per cup. My dad would literally spit his mug of mud out of his mouth if he heard this!

Apparently, a lucky pair of winners got a "golden ticket" to try the exclusive blend for free. No word in the article on how the coffee tasted but I sure hope it was the best darn java they ever had.

Yet for traders and active investors who think more about coffee beans than coffee cups the ultimate golden ticket is one that points to a meaningful trend change -- beforehand.

Does mainstream analysis serve that up hot?

Well, let's see. On April 18, coffee futures soared to their highest level since last October.

And, according to the popular experts, coffee had several reasons to perk up. From Bar Chart on April 17:

"Coffee prices Monday rallied sharply, with arabica climbing to a 6-1/4 month nearest-futures high."

The top 3 "fundamental" pick-me-ups included:

  1. ICE monitored arabica coffee inventories fell to a 4-month low of 709,612 bags.
  2. The Colombia Coffee Growers Federation reported that Colombia Mar coffee exports fell -19% year over year to 906,000 bags. Colombia is the world's second largest arabica bean producer.
  3. On April 5, the International Coffee Organization (ICO) reported global coffee exports during Oct-Feb fell -8.7% year over year.

But note well: This data was reported between April 5-17th. Yet, if we zoom out on the chart, we see that coffee's trend turned at the end of March.

So, the news didn't prepare active investors for coffee's rally -- at best it only "helped" them follow it.

On March 31, however, our Commodity Pro Service showed a version of this chart of coffee. There, editor Jim Martens identified the near-completion of a wave 2 correction, paving the way for a third wave advance:

There's a little bit more downside available next week to finish this corrective setback. But it's just that. A corrective setback. Once it's complete, coffee will resume its bullish trend and do so in a third wave advance.

What followed?

Coffee did see a bit more downside ... before immediately reversing higher in a powerful advance to 7-month highs thru April 18.

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