Is OJ Getting Ready to Run?

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:

1. A rounding bottom reversal pattern after a significant decline from the 2017 highs.
2. Multiple tests of former support turned resistance near 131 and an increase in the frequency of such tests.  
3. 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. 

Crude Oil has broken out but its derivatives continue to grapple with overhead supply. Base metals have run into resistance. And Precious Metals can’t seem to start the next leg higher.

Commodities are a diverse asset class.

It pays to keep a close eye on the entire space as it’s full of insight and opportunity.  

Thanks for reading. As always, let us know what you think, and be sure to download this week’s Commodity Report below!