Coffee has been anything but hot lately. Actually it has been pretty cold, performance wise, declining more than 25% the past few months. Is that decline an opportunity? Based on the pattern below, it may be.
The large decline in coffee futures this year has hit Coffee ETF (NYSE:JO), which has fallen hard so far this year. The large decline saw it test dual support last week, where it may have created a reversal pattern (bullish wick) at (1).
The trend remains down for sure. If JO breaks out above falling resistance at (2), it will attract buyers, as bullish sentiment for coffee stands at just 23%. Coffee traders have also established a crowded trade, making a huge bet the commodity will head lower. Historically, when traders establish such a position in coffee, it has been closer to a low than a high.