Cocoa futures pushed lower in Wednesday's session to close beneath key level support on the long term chart. Autochartist has identified this move as a downside breakout from a Descending chart pattern, implying a continuation of the sell-off towards new lows.
This pattern has been developing over the course of 30 4-hour candles, making it the dominant technical formation. The flat bottom of the wedge has acted as support through multiple corrections. The break beneath the level occurred on a low momentum reading, which suggests traders should await further weakness in Thursday's session to confirm the sell signal.
If the anticipated follow-through materializes, the market should drop to the projected price target of between $1,930 and $2,015 per metric ton to complete the breakout.
If buying pressure does enter the market near the current price level to pull the market back into the Descending Wedge, a retracement back to resistance at $2,140 per ton would be the expected move. This would prolong the development of the wedge and set up another signal on a futures move accompanied by a higher momentum reading.
For further information on this and other Autochartist products, visit our website at www.autochartist.com