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Time to buy this caffeine-fuelled commodity?

by , 01 October 2015

If you like to trade commodities, you'll know there's more to trading commodities than gold and oil. There are other commodities like grains, cotton and sugar.

Another commodity you can trade is coffee. And the price of coffee looks like it could be ready to rally.

Read on to find out more about this trading opportunity…


Why coffee could be about to soar


At the moment, futures traders are betting against the price of coffee rising. You can see this from the Commitment of Traders (COT) report for the commodity.

The COT is a weekly report that shows where futures traders are putting their money. When you see the majority of traders taking the same stance, it can be a powerful contrarian indicator, Brett Eversole in Daily Wealth explains.

This is because when futures traders are trading on the same outcome, the opposite tends to happen.

This is what’s happening with coffee. Futures traders are betting that the price is going to fall. And this is a strong indication that coffee prices will rise.

Have a look at this on the chart below…


Coffee COT report



The time to put a long coffee trade on could be nearing


In the past, a reading of less than -14,000 has sent the price of coffee rallying higher to reach 0 or above. And in the past, the coffee price has risen an average of 25% over the following four months or so.

This has happened five times over the past ten years.

With the COT report for coffee hitting negative extremes, this commodity is worth keeping an eye on. If you see the price start to rebound, it could be worth putting a long trade on.

You can trade coffee via spread trading platforms.

So there you have it. Why the time could be nearing to buy this caffeine-fuelled commodity.

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Time to buy this caffeine-fuelled commodity?
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