Most Popular
1. It’s a New Macro, the Gold Market Knows It, But Dead Men Walking Do Not (yet)- Gary_Tanashian
2.Stock Market Presidential Election Cycle Seasonal Trend Analysis - Nadeem_Walayat
3. Bitcoin S&P Pattern - Nadeem_Walayat
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
4.U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - Raymond_Matison
5. How to Profit from the Global Warming ClImate Change Mega Death Trend - Part1 - Nadeem_Walayat
7.Bitcoin Gravy Train Trend Forecast 2024 - - Nadeem_Walayat
8.The Bond Trade and Interest Rates - Nadeem_Walayat
9.It’s Easy to Scream Stocks Bubble! - Stephen_McBride
10.Fed’s Next Intertest Rate Move might not align with popular consensus - Richard_Mills
Last 7 days
Tesla Robo Taxis are Coming THIS YEAR! - 16th June 24
Will NVDA Crash the Market? - 16th June 24
Inflation Is Dead! Or Is It? - 16th June 24
Investors Are Forever Blowing Bubbles - 16th June 24
Stock Market Investor Sentiment - 8th June 24
S&P 494 Stocks Then & Now - 8th June 24
As Stocks Bears Begin To Hibernate, It's Now Time To Worry About A Bear Market - 8th June 24
Gold, Silver and Crypto | How Charts Look Before US Dollar Meltdown - 8th June 24
Gold & Silver Get Slammed on Positive Economic Reports - 8th June 24
Gold Summer Doldrums - 8th June 24
S&P USD Correction - 7th June 24
Israel's Smoke and Mirrors Fake War on Gaza - 7th June 24
US Banking Crisis 2024 That No One Is Paying Attention To - 7th June 24
The Fed Leads and the Market Follows? It's a Big Fat MYTH - 7th June 24
How Much Gold Is There In the World? - 7th June 24
Is There a Financial Crisis Bubbling Under the Surface? - 7th June 24
Bitcoin Trend Forecast, Crypto's Exit Strategy - 31st May 24
Zimbabwe Officials Already Looking to Inflate New Gold-Backed Currency - 31st May 24
India Silver Imports Have Already Topped 2023 Total - 31st May 24
Gold Has Done Its Job – Isn’t That Enough? - 31st May 24
Gold Stocks Catching Up - 31st May 24
Time to take the RED Pill - 28th May 24
US Economy Slowing Slipping into Recession, But Not There Yet - 28th May 24
Gold vs. Silver – Very Important Medium-term Signal - 28th May 24
Is Gold Price Heading to $2,275 - 2,280? - 28th May 24
Stocks Bull Market Smoking Gun - 25th May 24
Congress Moves against Totalitarian Central Bank Digital Currency Schemes - 25th May 24
Government Tinkering With Prices Is Like Hiding All of the Street Signs - 25th May 24
Gold Mid Tier Mining Stocks Fundamentals - 25th May 24
Why US Interest Rates are a Nothing Burger - 24th May 24
Big Banks Are Pressuring The Fed To Losen Protection For Depositors - 24th May 24
Another Bank Failure: How to Tell if Your Bank is At Risk - 24th May 24
AI Stocks Portfolio and Tesla - 23rd May 24
All That Glitters Isn't Gold: Silver Has Outperformed Gold During This Gold Bull Run - 23rd May 24
Gold and Silver Expose Stock Market’s Phony Gains - 23rd May 24
S&P 500 Cyclical Relative Performance: Stocks Nearing Fully Valued - 23rd May 24
Nvidia NVDA Stock Earnings Rumble After Hours - 22nd May 24
Stock Market Trend Forecasts for 2024 and 2025 - 21st May 24
Silver Price Forecast: Trumpeting the Jubilee | Sovereign Debt Defaults - 21st May 24
Bitcoin Bull Market Bubble MANIA Rug Pulls 2024! - 19th May 24
Important Economic And Geopolitical Questions And Their Answers! - 19th May 24
Pakistan UN Ambassador Grows Some Balls Accuses Israel of Being Like Nazi Germany - 19th May 24
Could We See $27,000 Gold? - 19th May 24
Gold Mining Stocks Fundamentals - 19th May 24
The Gold and Silver Ship Will Set Sail! - 19th May 24

Market Oracle FREE Newsletter

How to Protect your Wealth by Investing in AI Tech Stocks

This is Why Cocoa's Crash Was a Perfect Setup

Commodities / Cocoa Aug 19, 2017 - 01:59 AM GMT

By: EWI

Commodities

Perfect from an Elliott wave perspective, that is. The other day, I went paddle-boarding for the first time and was struck by a familiar feeling; one that comes from, of all things, speculating in the markets.

See, when your board is in line with the current and the wind is at your back, the board moves effortlessly, gliding along the top of the water with no strain at all. This is the equivalent of trading with a market's trend.


On the other hand, when your board goes against the current and the wind comes at you from the front, any attempt to move forward feels like wading through wet cement. This is what it's like to enter a market during a countertrend move.

It goes without saying, we're all aiming for the first scenario. The question is, how do you know which move prices are about to make?

In 2013, our chief commodity analyst Jeffrey Kennedy co-authored an invaluable resource titled "Visual Guide to Elliott Wave Trading" in which he explained how combining Elliott analysis with technical methods enables traders to identify price action moving with, and against the larger trend. In the book, Jeffrey writes:

"Odds favor traders who are long in bull markets (and short in bear markets) versus short sellers in bull markets (and buyers in bear markets). Overall trading in the direction of the trend is the path of least resistance.

"The four best waves to trade are therefore: Wave 3, 5, A, and C because they are oriented in the direction of the one larger trend."

"Remember, five-wave moves determine the direction of the larger trend, while three wave moves offer traders an opportunity to join the trend. So in Figure 1.7, waves (2), (4), (5), and (B) are actually set-ups for high-confidence trades exploiting waves (3), (5), (A), and (C)."

Now, let's take Jeffrey's lesson and apply it to the real-world price action of a popular commodity market, cocoa. Back in September of 2016, cocoa prices were sailing toward their highest level in five years. And yet, that's precisely when Jeffrey began to prep the market's downside.

In his September 2016 Monthly Commodity Junctures' "Featured Market" video update, Jeffrey showed cocoa prices ideally positioned for a powerful wave c of (c) decline and wrote:

"As we move into 2017, if everything goes according to plan and cocoa continues to adhere to its Elliott wave scripts, I really think this area here, roughly centered around 1634 through 1597 is an ideal area for this wave C to actually fall to.

"Essentially, it's a very bearish forecast. The potential for a sizable sell-off is indeed very real and we know what to look for to signal that the decline has begun."

As for what happened next, the following chart answers: Cocoa prices turned down in September 2016, crashing onto the shores of a 10-year low in April 2017.

Since then, cocoa prices have been treading water in a sideways crawl. In the August 4 Daily Commodity Junctures' Weekly Wrap-up, Jeffrey explained what prices must do to re-ignite the downside, in a "final thrust" to his long-standing target.

Suffice it to say, cocoa's ship is still at sea, as the winds of the trend carry it to its next destination.


Free 15-Minute Video:
Introduction to the Wave Principle Applied

In this free 15-minute video excerpted from one of Elliott Wave International's most popular online courses, Senior Analyst Jeffrey Kennedy explains how you can take the Wave Principle and turn it into a trading methodology.

Get free, instant access

This article was syndicated by Elliott Wave International and was originally published under the headline This is Why Cocoa's Crash Was a Perfect Setup. EWI is the world's largest market forecasting firm. Its staff of full-time analysts led by Chartered Market Technician Robert Prechter provides 24-hour-a-day market analysis to institutional and private investors around the world.


© 2005-2022 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in