The price of Cocoa has experienced a large decline during today’s session as the has dropped by more than 4%. A negative close today would mark the 4th daily decline in a row and the size of the drop could be seen as indicating that the pace of the selling is picking up.
Earlier this month the market attempted to stage something of a recovery after printing a multi-year low of 1766. Civil unrest in the Ivory Coast, which saw police clash with ex-rebels threatened to disrupt supply in the biggest cocoa-producing country in the world and saw Cocoa futures trade at a six-week high last week.
This pop higher also saw a break above a falling trendline from the July 2016 highs and the outlook for the market was beginning to look more constructive. However this move has since partially reversed with reports of plentiful rain in the Ivory Coast seen as improving the prospects of the next harvest. In the western region of Soubre, at the hear of the cocoa belt, farmers have reported three heavy downpours and said that if the rain continues with good sun then there will be plenty of maturing pods on tress by mid-July.
Going forward levels to watch for potential support are 1879 and the yearly low at 1766. (The former also coincides with the falling trendline that was broken above this month). IN declining today the market has moved back below the 50 day SMA (red line) and unless we see bulls recapture this level then there is much to suggest the trend remains lower. If price can be pushed back above the 50 day SMA then the region around 2110 has previously acted as a swing level and may provide some resistance.