NYBOT cocoa futures closed sharply higher early Wednesday, gaining $54, or 3.48 percent, after an early test to the downside failed to attract follow-through selling, forcing speculators to cover and funds to buy later in the day, which boosted prices to 5-1/2-month highs, brokers said.
"We had a bear trap this morning. The market initially gapped lower at the open, which suckered in some more shorts, who had to cover later in the day," said one floor dealer.
Benchmark September cocoa finished $54 firmer at $1,604 a tonne, a couple of dollars off the top half of its $1,530-$1,606 trading range. This was the best close since January 22, when the contract ended at $1,658. December gained $52 to settle at $1,617, moving from a low of $1,543 to its session peak of $1,619. The rest ended up $51 to $54.
Cocoa futures opened lower Wednesday morning as trade and speculative accounts tried to follow through on Tuesday's correction lower. As the selling dried up, however, specs began to cover and, as prices rose, the funds began to buy into the strength of the market, traders said.
Final estimated cocoa futures volume on Wednesday jumped to 16,139 lots versus Tuesday's official count of 6,266 lots.
Open interest in the cocoa market fell 308 to 101,383 lots as of July 20.
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