Each year, Americans buy over 600 million pounds of candy and eat over 1 pound each for Halloween.
It's a lot...
But are there opportunities to profit from Americans ritualistically eating way too much candy? You betcha!
Let's talk about it.
After a historic 190% run earlier this year, cocoa futures have formed a textbook consolidation pattern:
In addition, chocolate bears have failed to register an oversold reading as the bulls have maintained control during this consolidation phase.
We like owning cocoa futures above 6,900, with a target of 11,700 over the coming 2-4 months.
Sugar futures look poised to retest last year's high:
After rallying 20% in a single week last month, the sweet commodity has formed a sweet bullish continuation pattern. If and when this pattern is resolved, we want to own sugar futures in anticipation of a fresh leg higher.
In addition to the chart pattern, the bulls registered a 14-day RSI reading above 80 during the last leg higher, as they were in complete control of the commodity.
We only want to own sugar above 21.50, with a target of 24 and 28 over the coming 2-4 months.
On the flip side, Hershey $HSY looks primed for a fresh leg lower:
The $37B candy manufacturing company has suffered a 30% drawdown since the sweet commodities starting rallying. If and when the bears can decisively resolve this distribution pattern, the path of least resistance will shift lower toward the 261.8% extension level.
We're short HSY below 187, with a target of 127 and a timeframe of 3-6 months.
Cocoa is in the process of resolving a multi-decade reversal pattern versus Hershey:
As you can see, this ratio recently rallied over 500% in less than 2-years and has been churning sideways since Easter earlier this year.
We're betting that cocoa will make another leg higher relative to HSY and continue climbing up the right-hand side of this massive base.
If this ratio is above 40, we want to be long with a target of 63 and 100 over the coming 6-12 months.
Sugar is a stones throw away from a new 52-week high relative to Hershey:
After a huge September, sugar futures look poised to build upon its recent upside momentum and reclaim the 61.8% retracement of the prior drawdown versus HSY.
We want to own this ratio above .126, with a target of .15 over the coming 2-4 months.
Will the market treat us with higher cocoa and sugar prices this holiday season or is this a trick?
COT Heatmap Highlights
Commercial hedgers unwound 22,000 contracts from their net-short sugar position.
Commercials unwound over 49,000 contracts from their net-short euro position and are on the verge of flipping net-long.
Commercials added nearly 11,000 contracts to their largest net-short silver position in over 3-years.
Today, we're outlining a regulated electric utility company that serves over 3 million customers across the southern United States for Trade of the Week.
You need to have a subscription to access this content in full.
