Coffee prices have fallen more than 50% since 2010 which can be seen through the coffee exchange traded fund symbol: JO. This investment seeks to replicate the returns that are potentially available through an unleveraged investment in coffee futures contracts as well as the rate of interest that could be earned on cash collateral invested in specified Treasury Bills.
Weekly, Hourly and Seasonal chart of JO Coffee Exchange Traded Fund
The top weekly chart shows my price targets for 2013 while the lower hourly chart shows strong on balance volume meaning big money is slowly building a long position in coffee. The small white chart is the seasonal chart of coffee futures showing prices historically rise from January–March, then a correction followed by another rally in to May.
Coffee prices are still in a down trend but it looks as though the end is near and if played properly it could provide up to 100% return on your capital in 2013.
Coffee Futures Monthly Long Term Chart
This chart gives you a bird’s eye view on where coffee prices are trading in the big picture scheme of things.
JO Coffee ETF VS. SBUX Starbucks Share Price:
Lower coffee bean prices has helped lift share prices of coffee companies like Starbucks: SBUX, Coffee Holdings Co.: JVA, Coffee Roasters Inc.: GMCR, and PEET’s Coffee: PEET. But cheap coffee may not be around that much longer and the lower earnings for coffee brewers may be closer than most may think.
2013 Caffeine Conclusion:
In short, I have been watching coffee prices for a bottoming pattern for months and I now feel it is getting really close to a bottom and it could be a great trade and investment in the new year. As for companies like Starbucks it will likely not have much of an affect on the bottom line until the second half of the year though it is something to keep an eye on during earning seasons.
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Chris Vermeulen
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1 comment:
Are we getting a bottom in coffee here.....today's action.
March coffee closed higher on Thursday as it consolidates some of the decline off January's high. The high range close set the stage for a steady to higher opening on Friday. Stochastics and the RSI are turning neutral to bullish hinting that a low might be in or is near. Closes above the 20 day moving average crossing at 14.31 would confirm that a short term low has been posted. If March extends the decline off January's high, weekly support crossing at 13.20 is the next downside target.
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