ICE Sept coffee futures are modestly weaker Wednesday, as the market posts a consolidative "inside" day session in which the high and low are confined within Tuesday's range. While action over the past several weeks has been sideways, a potential bull flag pattern is developing on the daily and weekly chart, which could propel the coffee contract sharply higher over the next several weeks.
ICE Sept coffee recently traded down 15 points at $1.6550 a pound.
A bull flag or pennant pattern is a bullish formation within pattern analysis. It is formed by a long flag "pole," which can be seen on the daily chart from June 11-June 15. Now, the coffee market is in the midst of forming the flag or pennant part of the pattern, which foreshadows higher prices ahead.
"The market is marking out a range below the June 24 high and although short-term upside momentum has been waning, the shallow nature of the pullback suggests coffee will eventually resume the June [upside] breakout," said Terry Gabriel, technical strategist at Ideaglobal in New York.
"It appears that a bullish flag pattern is forming on the weekly chart," Gabriel said. "Over the next one to two weeks a thrust above $1.6720 would suggest a resumption of the prevailing advance," he added.
Once the bull flag breaks open to the upside, Gabriel said "we should see the market exceed the $1.7650 June high. We could see the market press the $1.7900/1.8200 area."
On the downside, Gabriel added: "we should see support at the $1.5900/1.5600 area. That should contain any weakness."
Overall, Gabriel advised traders to "build long positions looking for the resolution of the bullish flag pattern, with support at the $1.5900/1.5700 area."
Segue os principais suportes e resistências: R2: 136,00, R1: 134,90, Fech.: 133,40, S1: 131,80, S2: 130,00.
