From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley
Softs are an area of the commodity space that hasn’t received much attention over the past several months, and for good reason.
As the rest of the commodities complex has been on fire, the action from this group has been muted as they’ve underperformed their peers significantly since last year.
Besides Sugar reaching our initial objective last month and Coffee breaking out of a 4-year bottom, Softs have been a real snooze fest.
Cotton continues to chop within a broad range. Cocoa is well below overhead supply. And OJ grinds sideways as it builds a 3-year base.
But it looks like Orange Juice futures are poised to break free to the upside.
Let’s take a closer look at this favorable risk/reward opportunity in OJ and lay out a potential trade setup to get long this base breakout, if and when it comes...
Here’s the weekly chart of Orange Juice futures:
Three things stand out in the Chart of OJ:
A rounding bottomreversal pattern after a significant decline from the 2017 highs.
A clear and well-defined risk level with multiple contact points to trade against.
These are among the foremost characteristics we look for in identifying bullish setups.
We want to buy on strength above 131 with an upside objective near 171 and the former 2018 highs. We are only long if we're above 131. If we're below 131, OJ futures are a no-touch!
While OJ provides a clear shot, the overall commodity market continues to send mixed signals.