Cocoa on ICE Futures US fell below two Fibonacci retracement support lines in its last two trading days, and though buyers appeared at Monday's lows, a rupture of next support levels would lead bean prices back to early April levels, or lower. New York cocoa prices took their biggest three-day dive in 15 months, falling more than 7 percent to $2,203, their lowest level since May 3.
Along the way, a 200-day moving average gave way, then ruptured a 50 percent Fibonacci retracement of the move from the December 3, 2012 high down to the March low at $2,034, followed by the 61.8 percent retracement level of the same move. September cocoa futures on ICE dropped $38, or 1.7 percent, to end at $2,215 a tonne, recouping some of those losses. The settlement was still the lowest for cocoa's second position since May 31.
Cocoa's decline to a two-week low at $2,203 stopped just short of a triple bottom formed in late May between $2,198 and $2,200 per tonne. If cocoa continues its descent and tumbles through that area, prices would find little support before the April 8 low at $2,143. Kash Kamal, research analyst at Sucden Financial in London, said in a research note that he pegged next support at $2,190, just beneath the April 9 low.
If prices pick up momentum from the late Monday buying, however, resistance would loom first at the session high of $2,253, then the 50 percent Fibonacci level at $2,295, and Friday's high at $2,310 per tonne. Kamal's analysis points to eventual recovery targets in the $2,370 to $2,380 range, an area of prior highs that held firm in previous attempts to push above them. This area should "keep pressure on any further upward momentum," said Kamal.