Last week's upside reversal in the coffee futures market appears to be a successful one, as short-covering and strong buying has already carried the price about half the distance to the minimum forecast price target. A continuation of the rally may continue on the momentum of last week's gains.
The rally began with a pivotal breakout from the Triangle chart pattern which began developing early in September from the highs above $2.80 per pound, with the selling climax below $2.20 per pound establishing the bottom of the range. This represents a very large decline in coffee in terms of price and percentage of the overall price, which left a wide area for a technical rally to reach towards. The lower end of this forecast at $2.52 per pound is fairly close to Friday's settlement price of $2.40 per pound.
The top end of the forecast remains significantly higher at $2.84 per pound. If achieved, this would represent a 100% retracement of the initial sell-off and suggest the entire chart pattern may have been short term pullback in the overall bear market. Traders will be watching for indications of any selling pressure if the minimum target is reached this week.
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