The impressive crash in Cocoa #7 (CAN24), which started on April 25, had certainly been anticipated on the first move below the 10-unit exponential moving average (EMA). It has been without fail the most reliable entry point in this historical record run for cocoa since the start of September 2023.
No doubt the bears are in charge short term, as prices are trading below all the 10, 20, and 50 EMAs but approaching strong support at 5,990. Watch out for this level in the next sessions.
The RSI at 38.84 is approaching the oversold area, but given the extreme volatility of the last days, it cannot be followed accurately.
Ivory Coast and Ghana represent together about 60% of world's production with Ivory Coast exports down 30% and Ghana down 41% year to date as a result of bad weather and a devastating bean disease. Cocoa remains in deficit for the third year and is expected to be in deficit in 2025 as well, with some light positive news from the recent World Cocoa Conference in Brussels indicating a production increase in the next crop (October-March).
Short term though, the fundamental situation has not changed much, and with a majority of speculative positions and record-low liquidity, this market will stay very volatile for a while.
Positive Performers This Week in Europe
Corn (XBM24) +5.30%: European corn is moving above the 10, 20, and 50 EMA in an uptrend. From the 168 minimum from Feb. 19, this has been a solid rally with less volatility in the last sessions. Euronext Commitments of Traders report for May 10 shows additional investors adding to the net long positions.
There are concerns about dry weather in Russia mixed with severe rains early in May in southern Brazil. Russia's 2024 wheat crop now is estimated at 91 million metric tons, down from 93 million tons, and it might get worse as the weather is particularly dry so far this season.
The daily RSI at 65.4 still might have more sessions to run, but once above 70 we note many pullbacks on the chart. The trend continues up.
Copper Grade A 3M Cash (P0Y00) +5.25%: This industrial metal, a key barometer for inflation and activity, is firmly on an uptrend since March 13. LME copper stocks are at 104,425t as of May 15, a significant decline from the191,925 near-term peak, set in October. There are reports about copper shortages in the market.
Also, the last report on UK LME Copper Future and Options Manage Money Net Position marks a record 63,247 contracts, which is supporting the current boom.
Candles are showing successive higher highs and higher lows together with a widening upward spread between all 10 and 20 EMAs. The 10 EMA acts as a very reliable dynamic support which has been an ideal entry for long traders so far. Any full candle below the 10 EMA should sound alarms on existing long positions.
The daily RSI marking 71.31 is entering the overbought area. However, we see that statistically only levels above 75 produced important pullbacks - something to watch closely for long traders.
A recent S&P Global report states that achieving net-zero carbon emission targets would likely entail a doubling of annual copper demand by 2035 to 50 million metric tons.
Facing strong historical resistance at the 10,700 level plus the mentioned record net position have both historically triggered reversals. For now, the trend is your friend.
Nickel 3M Cash (P8Y00) +1.58%: Nickel keeps running the uptrend well above the 10, 20, and 50 EMA. The market is using the 20 EMA as an effective dynamic support from the last 30 daily sessions. Volume is also trading above average in recent sessions, north of 6,500 contracts per day.
There are reported new fund positions and news of supply shortages in New Caledonia as a result of political unrest there. New Caledonia is one of the top nickel mining regions globally. Prices look set to break the fundamental 20,000 mark soon, and we could be in for a rally if the supply issues are not addressed soon.
Negative Performers This Week in Europe
White Sugar #5 (SWQ24) -6.85%: We have bearish news from Brazil, as sugar industry group UNICA reported on Wednesday that sugar production in the Centre-South region totaled 1.84 million tons in the second half of April, up 84.25% from the same period a year earlier. The general downward movement in all soft commodities this week is also supporting the direction.
The daily RSI is marking 29, which is extreme oversold. On the 3 previous dates when the indicator crossed down the critical 30 level - in June 2023, December 2023 and April 2024 - the market experienced a turnaround.
Also note that 530 is an important historical support, so it's not clear how much steam is left to continue the selling pressure.
UK Natural Gas Jun 24 (NFM24) -3.37%: UK nat gas is stuck in a range, as anticipated in my previous articles. All of the EMAs are very close to each other, and price action shows very little volatility. The 50 EMA is still acting as strong support, but for now the supply and demand seems to have found a balance in the absence of major news.
Storage levels across Europe remain at 64%, and it is expected by most analysts that Europe will achieve 100% storage at the start of the heating season. So, any starting rally looks like will be contained.
Robusta Coffee 10-T (RMN24) -0.55%: Following a pattern similar to cocoa, European robusta coffee also had its crash breaking down the 10, 20, and 50 EMAs from its 4,338 top on April 25. The daily RSI hit 32.83 on May 7, and from there made an impressive turnaround. Near 30, at the oversold level, the RSI seems to be an effective tool so far.
Roasters are looking for more affordable blend options and as arabica prices had its boom and crash, robusta (the less preferred category) is following suit.
The main reasons for the price action were dry conditions in Brazil, and more recently in Vietnam, plus the ongoing Red Sea crisis and its effect on trade routes. Reports of recovery in ICE robusta coffee inventories also put downward pressure in prices this week, together with fund liquidations. The overall picture remains mixed, with dryness still an issue in Brazil.
On the date of publication, Cesar Marconetti did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
