$CC #F: Cocoa Prices Offer a Great Opportunity before Inflation
Cocoa (or cocoa bean) is one of soft commodities, along with sugar, coffee, orange juice and cotton. The bean is the fully dried and fermented seed, wherefrom cocoa solids and cocoa butter can be extracted. Cocoa beans are the basis of the chocolate. One can trade Cocoa futures at ICE owned New York Board of Trade in contracts of 10 metric tons each under the ticker CC #F. Also, there are similar contracts at CME owned NYMEX under the ticker CJ #F.
Currently, we see other soft commodities like coffee and sugar in a new large cycle higher after a long period of depressed prices. Medium-term, a correction is happening. Later on, we expect another bullish cycle to take place. Based on the correlation within group of softs, the cocoa seed is expected to end correction and, then, accelerate higher as well. In the initial article on CC #F from March 2021 we have provided the main idea. Since then, the price has continued oscillations in a narrow range bound market. From practical perspective, it provides a great opportunity to accumulate long position in cocoa beans before inflation will start. Here, we present the updated view.
Cocoa Monthly Elliott Wave Analysis 08.17.2022
The monthly chart below shows the cocoa seed front contract CC #F at NYBOT. From the important low in November 2000, the prices have developed a cycle higher in blue wave (I) of a super cycle degree. Hereby, wave (I) has demonstrated a leading diagonal pattern and has ended in March 2011 at 3775. From the all-time highs, a correction lower in wave (II) has unfolded as an Elliott Wave zigzag pattern. In 6 years, CC #F has become cheaper by more than 50% reaching 1756 level. It is the preferred view that an important bottom on April 2017 has been set and the correction has ended. From the lows, a new rally in prices within blue wave (III) may have started.
For 2023–2030, the expectations are to break to the new all-time highs. The target for wave (III) will be 4842–6753 area. From current levels, the cocoa seed can, therefore, double in price.
From the April 2017 lows, the advance higher is showing red waves I and II. Then, a higher high within a new cycle in red wave III, so far in black wave ((3)), has not reached yet the equal legs extension area towards 3165–3898. Therefore, while the price remains above 1982, the bullish sequence will push the price higher.
In shorter cycles, waves ((1)) and ((2)) have ended. Currently, wave ((3)) of III may be already in progress.
Cocoa Daily Elliott Wave Analysis 08.17.2022
The daily chart below shows in more detail the advance from the July 2020 lows where wave ((2)) has ended. From the bottom at 2092, one can observe an initial nest in waves (1)-(2) building up. To open up a new cycle, wave (1) has pushed higher and ended in Septmber 2020 at 2708. Thereafter, consolidation in wave (2) unfolds as an expanded flat and is still in progress. First, red wave A of (2) has ended in November 2020 at 2280 lows. Then, a connector in red wave B has printed a new high above wave (1) peak at the end of the same month November. Finally, from 2821 highs, an ending diagonal in wave C should close the nest.
The overall structure of the wave C is very choppy and overlapping. The preffered view is an ending diagonal being 33333 structure. It might be still in wave ((iii)) of C. Expectations are to see a bounce in wave ((iv)) and then lower in wave ((v)). Based on the length of waves ((i))-((ii)), waves ((iii))-((v)) may reach 2204–2092 area.
Investors and traders can be, therefore, looking to continue accumulating position. The targets are 3165–3898 in medium term and 4842–6753 in a long run.