Trade of The Day – Coffee

Facts:

• The EMA100 moving average crossed below the EMA200 moving average.
• The RSI [14] level is around ~35.
• The price is below the regression line from the last 24 months.

Recommendation:

• Short position (Sell) on COFFEE at the market price.
• Target price (Take Profit, TP): 220
• Stop Loss (SL): 347

COFFEE (D1)

Source: xStation5 OPINION: After the breakout from a double top pattern, the price is highly likely to be entering a new market regime, with the current target direction defined by a parallel descending channel. The downward move is strongly supported by the so-called “Death Cross” (EMA100 and EMA200). Based on the deviation from the regression line and Fibonacci retracement levels, a likely target for the price move can be set at the 161.8 extension (220). The bearish setup would be invalidated by a clear breakout from the current descending channel; therefore, the protective order should be placed at 347 USD. Another significant risk to further declines may be the RSI level, which at around 35 points already signals an oversold condition. However, as shown on the RSI chart, when the price entered a strong downtrend it tended to fall even further, toward the 25 area. The more likely scenario, however, is a temporary consolidation and RSI normalization in the 50–40 range before the decline deepens. Methodology and assumptions:

• The recommendation is based on technical analysis of the chart, in particular EMA moving averages and Fibonacci levels.
• The target level was determined based on Fibonacci levels.
• The stop loss protective order was determined based on a favorable risk-to-reward ratio and is based on a Fibonacci level.

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