Most Popular
1. Banking Crisis is Stocks Bull Market Buying Opportunity - Nadeem_Walayat
2.The Crypto Signal for the Precious Metals Market - P_Radomski_CFA
3. One Possible Outcome to a New World Order - Raymond_Matison
4.Nvidia Blow Off Top - Flying High like the Phoenix too Close to the Sun - Nadeem_Walayat
5. Apple AAPL Stock Trend and Earnings Analysis - Nadeem_Walayat
6.AI, Stocks, and Gold Stocks – Connected After All - P_Radomski_CFA
7.Stock Market CHEAT SHEET - - Nadeem_Walayat
8.US Debt Ceiling Crisis Smoke and Mirrors Circus - Nadeem_Walayat
9.Silver Price May Explode - Avi_Gilburt
10.More US Banks Could Collapse -- A Lot More- EWI
Last 7 days
US Presidential Election Cycle and Recessions - 18th Mar 24
US Recession Already Happened in 2022! - 18th Mar 24
AI can now remember everything you say - 18th Mar 24
Bitcoin Crypto Mania 2024 - MicroStrategy MSTR Blow off Top! - 14th Mar 24
Bitcoin Gravy Train Trend Forecast 2024 - 11th Mar 24
Gold and the Long-Term Inflation Cycle - 11th Mar 24
Fed’s Next Intertest Rate Move might not align with popular consensus - 11th Mar 24
Two Reasons The Fed Manipulates Interest Rates - 11th Mar 24
US Dollar Trend 2024 - 9th Mar 2024
The Bond Trade and Interest Rates - 9th Mar 2024
Investors Don’t Believe the Gold Rally, Still Prefer General Stocks - 9th Mar 2024
Paper Gold Vs. Real Gold: It's Important to Know the Difference - 9th Mar 2024
Stocks: What This "Record Extreme" Indicator May Be Signaling - 9th Mar 2024
My 3 Favorite Trade Setups - Elliott Wave Course - 9th Mar 2024
Bitcoin Crypto Bubble Mania! - 4th Mar 2024
US Interest Rates - When WIll the Fed Pivot - 1st Mar 2024
S&P Stock Market Real Earnings Yield - 29th Feb 2024
US Unemployment is a Fake Statistic - 29th Feb 2024
U.S. financial market’s “Weimar phase” impact to your fiat and digital assets - 29th Feb 2024
What a Breakdown in Silver Mining Stocks! What an Opportunity! - 29th Feb 2024
Why AI will Soon become SA - Synthetic Intelligence - The Machine Learning Megatrend - 29th Feb 2024
Keep Calm and Carry on Buying Quantum AI Tech Stocks - 19th Feb 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