NY cocoa may fall toward $4,704 in Q4
SINGAPORE, Sept 29 (Reuters) - New York cocoa may fall toward $4,704 per metric ton in the fourth quarter, following its failure to break a key resistance at $6,766.
The failure was mainly due to the completion of a five-wave cycle from $2,861. Theoretically, the current correction could extend to the bottom of the wave 2 at $3,062.
A retracement analysis on the downtrend from $10,671 revealed not only the resistance at $6,766, but also the support at $5,844, the 38.2% level, which was broken.
The break suggests a further drop to $4,704, which is considered a much conservative target. A break below this level would trigger a further fall to $4,001.
The wave 5 could be alternatively counted as the wave 3 and the current correction might be riding on the wave 4. This alternate wave count indicates an incomplete uptrend.
Under this scenario, the correction would be very shallow, probably having ended. Such a possibility would increase when the market breaks above $5,844.
A retracement analysis on the daily chart supports the bearish outlook. The correction from $6,815 closely observes the series of the retracements on the uptrend from $2,848.
The relation strongly indicates a reversal of the trend. Generally, the correction may extend into the range formed by the 61.8% and the 50% levels, namely $4,364-$4,832.
A break above $5,879 could be followed by a rise into $6,236-$6,815 range.
* The cocoa report is published every Wednesday and Friday.
** Wang Tao is a Reuters market analyst for commodities and energy technicals. The views expressed are his own. His analyses are exclusively published on Workspace - a platform provided by London Stock Exchange.
*** No information in this analysis should be considered as being business, financial, or legal advice. Each reader should consult his or her own professional or other advisers for business, financial, or legal advice regarding the products mentioned in the analyses.