If you are bearish you think the market will fall, and a bearish market is a market that is falling.
If you are bullish you think the market will rise, and a bullish market is a market that is rising.
A Candlestick Chart is an effective way of analysing the market. It gives four pieces of data: market open, market close, the day’s highest market level & the day’s lowest market level.
Channels are double trend lines essentially. A line that can be drawn between connecting points parallel to the main trendline, creates a channel. Channels provide Support/floor (lower line) and resistance/ceiling (upper line) levels.
The ICE Coffee C contract is the world benchmark for Arabica coffee. The contract prices physical delivery of exchange – grade green beans, from one of 20 countries of origin in a licensed warehouse to one of several ports in the U. S. and Europe. The contract covers 37,500 Lb, or 17,010kg and can be bought against different points in the future, segmented by the following terminal months: March, May, July, September and December. Reference: Intercontinental Exchange.
Commitment of Traders Report.
The aim of the Commitment of Traders (COT) Report is to provide detailed information on which type of market participant is doing what and many traders use this information to confirm or deny their opinion regarding market direction. What do we mean by market participants? In a nutshell, anyone who uses a futures market is either a commercial trader or a speculator. Commercial traders include anybody involved in the physical supply chain and they come to the futures market looking to offset their commercial risk.
Speculators (also known as funds) are happy to take on that commercial risk as they seek a profit. Speculators are often referred to as ‘the funds’ or ‘non-commercials’. By looking at the COT, we can watch how the funds are behaving and from this draw conclusions on market direction. The Arabica COT gets released every Friday evening and the data in the report relates to data up Tuesday. Example: The COT report released on Friday 11th October actually relates to data between Tuesday 1st and Tuesday 8th of October. There is a time lag between the data cut off (8th) and data released (11th) Reference Intercontinental Exchange.
Double top and double bottom.
Double top and bottom patterns are chart patterns that occur when the underlying investment moves in a similar pattern to the letter “W” (double bottom) or “M” (double top). The double bottom is where the market drops, rebounds, drops to the original level where it dropped to previously, and then rebounds again. Double top is when the market grows, drops, grows again then drops down again. Reference: Investopedia. Also, see our January 2019 market report for further explanation.
Duration of trends.
Trends can be short term (hourly/daily), medium-term (weekly/monthly) or long-term (monthly/yearly). What duration constitutes a trend is subjective and will vary trader to trader. For a day trader who is looking at 60 second charts, an hour would be medium term.
First Notice Day (FND).
For Arabica Futures, First Notice Day (FND) occurs 7 working days before the last working day of the calendar month. It is the first day that an investor who has purchased a futures contract may be required to take physical delivery from the exchange. Physical coffee traders, like us, close out our position (fix the price) before this day because we don’t want to take any delivery of coffee from the exchange.
Another name for US Dollars.
An investment to minimize or offset the chance as asset will lose value as a result of adverse price movements.
Names given to the market are all referring to the same Intercontinental Exchange (ICE) Coffee C Futures market, examples include Market, NYC, New York.
Regarding the coffee futures market, open interest is the total number of futures contracts for NYC Arabica across all the months. Reference: Investopedia.
Overbought vs. Oversold.
Overbought describes a short-term price extreme that the market has rallied too far, and too fast, and experts believe it’s selling more than its actually worth. Oversold is when the market has fallen too far, too fast over a short period and investors feel the stock is trading below its true value.
Short covering is where the speculators (specs) are buying because they are too short and the market is tracking upwards.
Technical vs. Fundamental analysis.
Technical analysis: Technical analysis focuses on what actually happens: it is a method of predicting price movements and future market trends by studying charts and patterns of past market action. Fundamental analysis: A method of predicting price movements because of supply side developments like a frost in Brazil or a crop report of a big upcoming crop in Vietnam for example. Fundamental analysis focuses on what ought to happen.
The specs/funds vs commercials.
The specs, otherwise known as the funds or non-commercials, are market players who are buying and selling coffee futures primarily to make money on the futures transaction, they will never take delivery of the physical coffee. The commercials are market players who use coffee futures primarily to hedge their physical coffee.
Trendlines are drawn onto a chart to reflect a price movement. You need to be able to draw at least three consecutive connecting points for the trend to be valid. You can have an uptrend, a downtrend, and a sideways trend. They help us identify the direction and length of a trend. In this example the trend line is yellow.
Uptrends and downtrends.
These are types of trend lines. Uptrends should have higher highs and higher lows with the trend line drawn along the bottom of the trend. Downtrends should have lower highs and lower lows with the line drawn along the top of the trend.