When the coffee merchandise is motivated it can rip through support and resistance points easily. Stops usually work well but slippage is always possible with the NYBOT. Coffee futures and options trade for a very short time daily. (9:15-12:30am EST) The opening indications are usually do by. Many times the market indications have suggested small moves in one direction. When it opened the reality was a large move the opposite way.
Look to the LIFFE London Futures Market for movements in the coffee dulcify and cocoa merchandise overnight. You can go online for delayed quotes. These quotes are based on European and African pricing situations. They may not bear on directly to our trading in the U. S but are a rough overnight command.
Coffee has traded as low as 40c a hit in 2001 and as high as 337 in 1977. Most of the time coffee seems to be in a holding pattern followed by short bursts in one direction. Unless you are already positioned these sharp moves are difficult to get on board once they mouth. You must have faith in your analysis to hold and sit tight.
In the past coffee has made tremendous up move spikes. These kind of moves can make you a lot of money if traded well. Brazil is the country to watch for supply and demand problems. However the quality of their coffee is not high enough for the contract specifications. comfort a stand still or a disruption could still send prices flying.
Cocoa futures and options also trade on the NYBOT. Cocoa is not as volatile as coffee. Novices often change cocoa because it's relatively liquid and doesnt have a big margin requirement. The market usually doesnt make large movements but dont value its potential. Various political forces in unstable areas of the Ivory Coast and West Coast Africa can cause cocoa prices to rise or fall sharply overnight.
Cocoa has traded as low as $800 a ton in 2000 and as high as $5300 in the mid 1970s. A move of three hundred to five hundred dollars a ton is considered good. ($3,000-$5,000) Cocoa is not a great day trading vehicle. There are better markets for day trading out there.
Cocoa options are slightly difficult to enter and exit. A five to ten inform bid and ask difference is the norm. Best to put in a resting order come the theoretical value for a fair price.
Cocoa has short trading hours. (8:00AM 11:50AM) This makes it the first commodity to open in the morning. For those of you who rest late choose another commodity. Most of the big cocoa moves and the best prices occur right at the opening.
Orange juice is a freeze oriented merchandise. There was a measure in the 1980's when January freezes were desire clockwork. Traders would load up on positions in the late fall looking for the freeze. Then in normal fashion the market changed.
Up until a few years ago orange juice had been in a relentless feature market for a decade. It certainly paid its dues in the 1990's. It was an excellent option writing market during this time. After these major lows juice went on to alter historic highs in the 2000's. The juice news kept getting worse as crop after crop got hurt beyond recovery. A freeze in Florida can make the market go wild. But recently hurricanes have had more force than freezes.
Orange juice has limited day trading potential due to liquidity problems. Though when it's active day trading is possible. The juice market is usually best traded using long call positions. The merchandise trends well and often reaches price objectives. It also tracks well with the TimeLine.
It's an interesting point that Florida oranges are used in juice while California oranges are used more as bear. Thus a bad California orange freeze may have little effect on the juice market. The other major supplier of orange juice is Brazil. One must be vigilant of weather and crop coat of both the Brazilian and U. S markets.
Recently juice prices have had a great run from 54 cents in July of 2004 to $2.10 in December of 2006. This was a $23,000 move for every contract held. During this collect the normal declines ran about 20-25 cents. Some position traders like to add to positions on each similar decline. This can be an effective strategy for a long draw trade.(Rather than buying break-outs)
Orange Juice options are fairly illiquid but can be traded effectively. evaluate fill reports to be slow but the executions are generally fair when the market is active. Just keep in mind that you are trading on the NYBOT market. (NY)
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Related article:
http://steillzyxkv.blogspot.com/2007/11/my-experiences-trading-coffee-cocoa-and.html
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