Softs: (Cocoa) Cocoa opened weaker Monday morning due to follow-through profit taking from Friday's close. We are going to pull our recommendation to sell Cocoa due to our objective almost being met without hitting our sell point. If we continue to see liquidation, we will be buyers up against the moving averages. The 20-day moving average comes in at 2597 and the 200-day at 2579. Cocoa's fundamentals are still bullish and we feel the longer-term trend is still higher. This is due to the concerns of tight supplies for the Ivory Coast. That is the number one growing region for Cocoa. As long as these reports are still coming out with tight supplies, Allendale will remain friendly.
Trade Recommendation(s):
(Cocoa) Buy 1 March Cocoa at 2635, Risk 2560, Objective 2835
Technical Commentary: (Cocoa) Cocoa is still in an uptrend and could see a retest of some major moving averages. You will see good support at 2623(low on 1/27), 2597(20 day MA) and good resistance at 2806 (High on 9/25), and 2837(Resent highs). As mentioned before, we are still in an uptrend and Allendale is still looking at dips as buying opportunities unless we see a close below 2500. That will take out the current uptrend and change the technical picture.
Energies: March Crude Oil settled $1.60 lower Monday at $40.08. When the market realized that we made it through the weekend without a strike from the unionized refiners, selling ensued in the RBOB and Heating Oil, which pulled Crude Oil from its highs. We most likely saw some light buying in Crude Oil as spread traders unwound spreads from last week as RBOB dropped. The poor economic outlook still weighs heavily and weakness in equities today didn't change that sentiment as Macy's announced it would lay off 7,000 workers, less than a month after announcing they would close 11 stores.
Technical Commentary: Crude broke through $40 early Monday, but managed to close above $40. Close-in support in March will be Monday's low of $39.83; the January low of $39.11 and the contract low of $38 are further support. Close-in resistance is $42.45 with $44.45, $47, and $50 as further resistance. The short term up trend from the contract low and the high from the long-term downtrend converged Monday near its lows. A close above $39.90 will maintain the short term up trend while a close below $38.75 will put the market back below the long term down trend. A head and shoulder bottom is still possible on the March chart, but we need a move through $55 to confirm. It projects to $72. A move below $38 will nullify the possibility.
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