Coffee bulls were on the wrong side and got “Creamed!” Time for the bears to get “Creamed?”

CLICK ON CHART TO ENLARGE

After a 200% rally in Coffee futures between 2009 and 2011, investors grew to love coffee, hitting a 90% bullish reading near Coffee's top!  Boy were the bulls in for it, as Coffee proceeded to lose 50% of its value in 18 months.  Was this a crowded trade? FOR SURE!!!

Investors might like Coffee in the morning, yet when it comes to sentiment readings, very few are bullish Coffee right now.  Current readings stand at just 15% Bulls, one of the lowest readings in years.  Articles are easy to find in regards to record short positions that are in place in Coffee right now. Line (1) in the chart above, represents a 7-year support line, that has seen some decent Coffee rallies take place off of.

The bulls formed a crowded trade in Coffee 18 months ago and got creamed.  Have the bears formed a crowded trade and about to get creamed too? 

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5 Comments

  1. It seems that this technical analysis embeds the fundamental idea that the price of coffee should rise at a constant rate. Why should that be the case?

  2. David….No fundamental case being made with this chart. Sharing that this support line has been a good place to buy Coffee for the past 7 years. Rallies ranging from 25% to 200% have taken place from this line. Nothing more than that. I would want NOT want to own Coffee on a support break.

    One of the largest bullish wicks in 7 years took place on Monday of this week. Was that a tip off to some type of a rally? Stay tuned.

    Thanks for the viewership and comment,
    Chris

  3. Chris, I think this is one of the most compelling contrarian ideas I’ve seen you post – and that’s saying quite a lot, you’ve had some great ones. I will be curious to see how this plays out. Between overwhelming bearish sentiment, large short interest, seasonal strength in December and trend line technical support, I’m more than intrigued.

  4. Thanks Sir Ponzi, that is saying a ton from a guy who has put of with me for several years now! ;)

  5. In June you suggested to long Natural gas, due to a bullish inverse head & shoulders pattern and few people liked it at the timeand NG is up a ton since then. THANK YOU for sharing that opportunity.

    This idea seems similar, in that Coffee is near support and people don’t like it at this time, like NG back then.

    Keep up the great work and Thanks for sharing out of favor ideas that can really pay off!

    NG play you suggested http://blog.kimblechartingsolutions.com/2012/06/nartural-gas-attempting-to-create-a-bullish-head-shoulders-pattern-at-its-2001-lows/