|
The historic price collapse of cocoa“The historic price collapse of cocoa” by Jim Roemer - Meteorologist - Commodity Trading Advisor - Principal, Best Weather Inc. & Climate Predict - Publisher, Weather Wealth Newsletter MAY 1, 2024 - Evening Report
A few weeks ago, it became obvious to me that buying cocoa on a 400% rally would be a huge mistake and prices might soon mimic what happened during the “Tulip Craze” back in the 1600s. Dutch Tulip trading is the first well documented speculative commodity bubble. The same thing has just happened to cocoa prices.
W h e n t o s e l l a p a r a b o l i c c o m m o d i t y m o v e ?In order for me to justify entering a short position in a rising futures market, I need to see a change in the “fundamentals” of the particular commodity, ahead of time:
Below, are four examples in which the weather, or other fundamentals, caused a major collapse in commodity prices. Parabolic moves often last less than 6 months. Such was the case in cocoa.
Below are some of the technical indicators to call potential tops in markets. This is extremely sophisticated. Typically, I use fundamental analysis when the 5-day moving average goes above or below the 20-day moving average (see cocoa, below).
Bottom line (WRITTEN APRIL 8TH): “A change in fundamentals and the 5-day moving average going below the 20-day often signal a major trend-change. It is possible that (based solely on history) cocoa prices will peak soon (or have just peaked) and enter a deeper bear market in 2024-2025. This would be especially true if La Niña results in a slight surplus of cocoa next year.” Nevertheless, prices have sold off too quickly to justify selling the market at these prices. Early on Tuesday (4/30), WeatherWealth clients were advised to take potentially huge profits on recent short positions.
The chart above (July 2024 Cocoa) shows the end of day breakdown on Monday (4/29) Today's (5/1) end-of-day chart is shown below. All eyes will be gazing upon tomorrow's follow through.
Feel free to download a complimentary issue of WeatherWealth here: https://www.bestweatherinc.com/new-membership-options/ In early April, the issue addressed parabolic moves and how to navigate them. If interested in joining expert and novice commodity traders around the world who want better weather information and trading ideas, please request our free 2-week trial period to the WeatherWealth newsletter.
Jim Roemer, Scott Mathews, and The Weather Wealth Team Mr. Roemer owns Best Weather Inc., offering weather-related blogs for commodity traders and farmers. He also is a co-founder of Climate Predict, a detailed long-range global weather forecast tool. As one of the first meteorologists to become an NFA registered Commodity Trading Advisor, he has worked with major hedge funds, Midwest farmers, and individual traders for over 35 years. With a special emphasis on interpreting market psychology, coupled with his short and long-term trend forecasting in grains, softs, and the energy markets, he established a unique standing among advisors in the commodity risk management industry. Trading futures and options involves a significant risk of loss and is not suitable for everyone. Past performance is not necessarily indicative of future results. There is no warranty or representation that accounts following any trading program will be profitable.
On the date of publication, Jim Roemer 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. |
|