NYBOT cocoa futures ended on Wednesday with steep losses after hitting a near one-month high, as producers in Ghana decided to sell at the highs and then drew the rest of the market in to cash in on profits at quarter end.
"Cocoa is one of the only markets where speculators were short below the market. So, everyone got long as the market was running up, through $1,400 and $1,412, some critical levels, and $1,406 (per tonne) was a big technical level.
Some of the locals and speculators bought in the day," said one cocoa dealer. ]
Then, he said, when cocoa reached session highs in London, Ghana, the world's second largest cocoa producer, sold heavily.
"They did not even have that much to sell, but they caught the market at a time when everyone was committed to the long side," the dealer added.
London cocoa futures closed more than 3 percent lower on the selling there, after hitting contract lows on origin selling. In New York, traders said most of the volume occurred below $1,350 per tonne on the September contract.
Estimated NYBOT cocoa volume for Wednesday was 8,908 lots, compared with 4,051 lots on Tuesday.
Open interest on Tuesday fell 672 lots to 97,080. On Wednesdays call volume was 1,099 and puts came to 407 lots.
Some traders said they thought the end of the month and the quarter inspired some speculators to join in the selling in order to improve profits on their books.
"Industry was a good buyer, but in a situation like that they can wait for the market to come to them.
Pretty much everyone who was buying all week sold it all off again today. I think it was mostly technical selling," a trader said.
Technicians said they saw support in September cocoa at the session low of $1,335 per tonne, with resistance at the high $1,408 a tonne.
Dealers also said rollover business out of July and into September futures was largely complete.
The July contract expires on the 15th of the month.
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