Following one of the steepest price drops on record, coffee futures appears to have found support and may be poised to rally. Coffee had been in a multi-year bull market prior to the late summer liquidation in the commodities complex taking the wind out of its sails. The price fell from historic highs near $3.00 per pound all the way back to $2.20 over several down weeks in a row.

The downward price action found severe resistance with every bounce, forming the falling trend line of a very broad Triangle chart pattern. This pattern culminated with something close to a double bottom to form the support trend line of the triangle just below $2.20 a pound.

Wednesday's strong bounce after retesting the support triggered an upside breakout on modest momentum. As this is the first bullish technical development for the coffee market since the downdraft began, follow-through buying into the end of the week may set a short-covering rally in motion.

The projected price target from the breakout anticipates a minimum move to $2.52 per pound, with $2.84 seen as the top end of the forecast. A reversal back below $2.17 per pound would negate the pattern and imply further weakness ahead.

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