Friday, May 20, 2016

05/10/16 #Review of #Cocoa #Free

Ghana and Indonesia, leading producers of cocoa, reported a poor harvest due to a mixture of bad pesticide control and weather. Contracting supply from the world's leading produces, an outcome that has producers of chocolate scrambling to meet demand, has sent the price of cocoa higher 2015. This appears to be unwinding in 2016.

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The BEAR (Price) and BEAR (Leverage) trends under Q2 accumulation after the seasonal high position cocoa as a focused bear opportunity since the second week of January.


Interactive Charts: NIB, NIB PF

The long-term trend oscillator (LTCO) defines a down impulse from 37.24 to 37.42 since the second week of January (chart 1). The bears control the trend until reversed by a bearish crossover. Compression, the final phase of the CEC cycle, generally anticipates this change.

A close above 43.53 jumps the creek and transitions the trend from cause to mark up, while a close below 27.28 breaks the ice and transitions it to mark down.

Chart 1


The long-term leverage oscillator (LTLO) defines a bear phase since the second week of January (chart 2). This focuses the down impulse (see price).

A diffusion index (DI) of -19% defines Q2 accumulation (chart 3). A capitulation index (CAP) of 23% supports this message (chart 4). DI and CAP's trends, broader flows of leverage and sentiment from distribution to accumulation and complacency to fear supporting the bears (green arrows), should not only continue to extreme concentrations but also restrain upside expectations until reversed (see price). A rally under these trends, a sign of strength (SOS), would be bullish for cocoa longer term.

Chart 2

Chart 3

Chart 4


The 5-year seasonal cycle defines strength and upward bias until the first week of September. (chart 5). This path of least resistance restrains downside expectations (see price).

Chart 5


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