Cocoa has just registered its first significant long term directional trade signal in a long while, triggering a technical breakout to the downside in Wednesdays' session. Autochartist identified the signal on the 240-minute time interval after the nearby futures dropped below trend line support at $2,140 per ton.

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This move lower completed a very long range-bound price action for the market, which has been gradually forming into a Triangle chart pattern measuring 33 4-hour candles in duration. The Triangle scores nicely across the board, with an overall Quality ranking of 8 bars and a 9-bar momentum reading accompanying the current breakout.

The forecast calls for a move down to $2,014 per ton at a minimum, where the market may catch minor support. Additional selling pressure in the face of a weakening commodities complex could send the price to the lower end of the projected range. This could mean a move to $1,846 per ton or lower, exceeding a 100% retracement of the latest rally and encouraging the outlook that a long-term bear market in cocoa may be in the cards for 2012.

A move back above $2,240 per ton would significantly diminish the sell signal, making this a viable location for placing stop-loss or reversal orders.
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