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JO (Coffee ETF) Swing Trade Idea Update

JO (Coffee ETF) was posted as a Long Trade Setup on May 14th with an entry to be triggered on a break above the bullish falling wedge pattern. JO went on to trigger what appeared to be a convincing breakout last Monday via a very impulsive break above the pattern on well above average volume. Preparing to leave town for vacation, I missed the breakout (a follower of the site pointed it out to me yesterday) and as such, I did not post any suggested stops, as planned. From a pure R/R perspective, based on the current final target, T2 at 28.46, JO most likely would have exceeded any reasonable stop. With that being said, for those who are long JO or are considering a position, my thoughts are this:

While still in an unmistakable primary downtrend and as such, a counter-trend trade, JO still looks poised for a substantial rally & likely trend reversal. This first chart below is the updated daily chart of JO. With this new low, coffee prices have put in another, potentially more powerful divergent low as both the MACD & RSI have made higher lows while prices made a lower low. It is also worth noting that JO is now approaching the late 2013 lows, which are likely to act as support.

JO daily May 27th

JO daily May 27th

Finally, I've highlighted what could prove to be a similar pattern to the previous breakout in JO back in early January 2014. At that time, JO broke out above the primary downtrend line that was generated off of the Sept 2011 highs. As with Monday's breakout, that breakout was also confirmed via above average volume & as with Monday's breakout, that previous breakout was immediately met with profit taking (about a 7.7% drop). Following that initial profit taking bout, JO went on to gain about 91% in less than 3 months. While I don't expect a repeat of that extreme rally in coffee prices, I do still see the potential for a substantial rally over the next several months, possibly even the start of a new primary uptrend (bull market) in coffee prices.

As the charts still look constructive at this time & a suggested stop level was never posted (plus at least one follower of the site is still long JO), I will leave this trade as both an Active Trade as well as a Long Trade setup as one could certainly establish a new position or add to an existing position here just above the late 2013 lows with JO at the bottom of a bullish falling wedge pattern. With the potential for above average gains (about 35% to T2 from current levels) and the potential for additional price targets, should the charts confirm, JO will also be added as an Active Long-term Trade here around the 21.21 level with a suggested stop on any close below 20.30.

I have also included a daily chart of spot coffee prices ($COFFEE) below. As a futures-based ETN, JO may not always perfectly track coffee prices and as such, the price targets on JO may be slightly revised based on how spot coffee prices as well as coffee futures trade. JO also has the potential to morph into a longer-term swing trade, should the charts begin to firm up. For those considering scaling in or establishing a position here as we approach the 2013 lows, a stop not far below those prior lows would be prudent. Officially, JO will be considered stopped out on any close below 20.30 but those who took a full position on the breakout might consider a tighter stop, if still in the position. click here to view the live, annotated chart of $COFFEE

$COFFEE daily May 27th

$COFFEE daily May 27th

May 27, 2015 10:14am|Categories: Completed Trades - Long, Gold & Commodities, Long-Term Trades- Completed|Tags: , |Comments Off on JO (Coffee ETF) Swing Trade Idea Update