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Profit Taking Pressure in Cocoa


March cocoa sold off sharply overnight after a gap lower opening and traded back into Friday’s range. This move was telegraphed by disappointing action on Tuesday when the market dropped $60 late in the session after trading to new contract highs. The market had rallied nearly $500 in eight sessions and was vulnerable to a setback, so it was not a shock to see some profit-taking ahead of the holiday.


March coffee was moderately higher overnight, inside Tuesday’s range. The market has fallen 8.50 cents from last Thursday’s two-month high, which has helped corrected an overbought status. Demand is still a concern in light of the new coronavirus shutdowns, but the market is showing signs of being close to a near-term low. It continues to hold its ground above the three major moving averages, which is technically supportive.


With the surge to a new all-time high for the stock market and a drop in the US dollar, the lower close for March cotton on Tuesday was a bearish development. The market seems to have adequate supply, and if a record high stock market is already priced in, then cotton looks vulnerable to at least a short-term correction.


Sugar’s coiling price action over the past week has kept prices in relatively close to last Tuesday’s multi-year high, but it has extended its losing streak to four sessions despite carryover support from the key outside markets like crude oil, equities and the Brazilian real.

Futures and options trading involve significant risk of loss and may not be suitable for everyone.  Therefore, carefully consider whether such trading is suitable for you in light of your financial condition.  The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM.  The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared.  The information provided is designed to assist in your analysis and evaluation of the futures and options markets.  However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.

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