Today I was looking through more commodity charts and Coffee caught my attention. For most of 2015 and 8 months of 2016, Coffee formed a nice rounding bottom pattern. It broke out higher right into the downtrend line from the 2011 and 2014 highs. Upon a pullback, previous resistance (145-147 zone) did not act as support. After spending 6-7 weeks below this area, we are now back above it. Was that a failed breakdown of some sort? We will find out soon. If so, I think we will go higher into the downtrend again. This may be the 4th time it is tested. The more times a level is tested, the higher the likely hood it breaks.

Looking back further, Coffee is building a nice consolidation pattern. Explosive moves are no stranger to Coffee. We may very one see another soon.


I laid Starbucks (SBUX) over Coffee to see how they may trade in relation to one another. Starbucks is in blue and Coffee is in grey.

kc sbux.png

Doing some math, since 2009 Starbucks and Coffee (using the JO ETF here) have an annual correlation of 0.05. Since 2011, that correlation changes to -0.60. Taking a look at the chart it is easy to determine that. If we get a breakout rip in Coffee, is Starbucks going to come back down to earth?

Thank you and have a great week.