Well, for those of you who read the last coffee futures post and took action, you’re sitting on 100% profit already after having risked less than 25% of your initial margin to enter the trade.  Not too shabby.  Your average trader would take profits here, but I am not looking for small gains.  We want to ride this market for all its got, and that’s where things get tricky.

The technical picture here is textbook bullish.  Coffee rebounded off the lows after retesting the long term bottom, and it did so with bullish divergence from the MACD and RSI, as we discussed last time.  This time I’d like to point out another promising development, which is the crossing of all three moving averages. 

I typically observe the 20 day moving average more so than the others, but I don’t mind it at all when prices confirm a clear change of short term trend by blowing past all three.  As you can see, the red and green lines were quickly left behind, representing the 8 and 18 day moving average.  For trend followers, which includes most of the ‘big money’, this week’s action is decidedly bullish and a good opportunity to enter the trade. 

This strong technical setup in conjunction with the news I offered last time about the rising Columbian differentials could be the complete bull case.  We should see a little more action from here on out, so hold on tight.  We are now finding that rare occassion when fundamentals and technicals are decidedly aligned for coffee futures.  We are long from $1.05.